For more than two years 29 March 2019 was the date on which the UK was expected to leave the EU. Brexit has of course now been delayed, although the new longstop date of 31 October 2019 is itself subject to change. If the UK does not ratify the Withdrawal Agreement before 22 May and does not hold European Parliament elections (23-26 May) the UK will leave the EU without a deal on 31 May. For more information on the extension agreement between the UK and the EU read our recent blog here. If you want to know more about the UK's obligation to hold European Parliament elections visit our Brexit Hub. In any event, there is at least some extra time for UK businesses to ensure they are ready for Brexit.You can access our checklist of key questions businesses should be asking themselves here.
A no-deal Brexit remains a possibility notwithstanding the apparent desire of the UK Parliament to avoid that outcome. If the UK leaves the EU without a deal, importers and exporters risk goods being held at the UK border unless they have taken a number of key steps.
HMRC has been sending letters to UK businesses over the past six months detailing all of the steps that must be taken in order to prevent potential delays at the border. The letters are generally targeted at businesses trading exclusively with the EU that may not have the processes in place to trade with a "third country". Each of the letters include common points, emphasising the importance of understanding what individual businesses must do to be ready for a no-deal Brexit. This update highlights some of the key points that businesses should be aware of.
Three Things to Do Before Brexit
- Get a UK Economic Operator Registration Identification (EORI) Number;
- Register for the Transitional Simplified Procedures (TSP) if eligible;
- Make sure you are set up with an agent/appropriate software to make customs declarations.
HMRC has repeatedly stressed the importance of having the above measures in place before the UK's withdrawal from the EU. More comprehensive checklists on importing and exporting have been published by HMRC and are frequently updated.
An EORI number is central to maintaining an import/export business between the UK and EU if there is a no deal exit. The number is also a prerequisite to registration for the TSPs.
An application for an EORI number can take three days, and considering the increased demand HMRC is experiencing, we would suggest applying for this as soon as practicable. You can apply for an EORI number at this link.
Transitional Simplified Procedures (TSP)
The TSP regime allows businesses importing from the EU to delay certain payments and administrative requirements once goods have arrived at the border if the UK leaves the EU without a deal. See our recent update on TSP here.
On 22 March, HMRC announced two further updates to the TSP:
- Importers will now have until 4 October 2019 to submit customs decarations and pay any import duty for goods imported up to 30 September 2019. Businesses also have up to 30 September 2019 to provide a guarantee required to cover any customs duties that they wish to defer;
- TSP will now be available from all UK ports and airports if the UK leaves the EU without a deal, not just the original 22 ports and airports that were previously announced.
TSP are opt-in, and we recommend that UK businesses which import from the EU consider registering for the TSP to avoid any potential delay in moving goods across the border. You can register for TSP here.
Crucially, the TSP only apply to imports _ they do not apply to exporting goods into the EU. In addition, the TSP can only be used for goods of EU origin.
HMRC recommends that businesses unfamiliar with import/export procedures consider appointing an agent to deal with customs declarations.
If customs declarations are new to your business, an agent with the experience and knowledge to complete these for you may facilitate a smoother transition into previously untrodden territory.
A Small Note on VAT
HMRC has confirmed that in the event of a no-deal Brexit, deferred accounting will apply for VAT on imports. This means that import VAT would be declared and recovered on VAT returns, meaning VAT would no longer be due at the UK border, which should help cash flow for importers.
Conversely, VAT on exported goods would no longer be claimable through the EU VAT Refund Electronic System. HMRC requires any EU VAT refund claims for 2018 and 2019 be submitted prior to 5pm on the day the UK leaves the EU. Thereafter VAT on exports will need to be claimed directly from the individual EU member state. This will require a UK business exporting to multiple EU member states to register for VAT in each member state.
The implications of a no-deal Brexit on imports and exports is a key consideration for UK businesses. There is a chance that if businesses trading with the EU do not follow the HMRC's preparedness steps, goods could be caught in a void between the old rules and the new rules.
Visit our Brexit Hub for regular updates on Brexit related issues.