The UK left the EU on 31 January 2020 and we are now in a transition period until 31 December 2020 (if no extension to the transition is agreed). Under the Withdrawal Agreement, the UK continues to be treated as a Member of the EU until the end of the transition period, and negotiations are ongoing with the EU to agree arrangements for UK- EU trade and the wider relationship after 31 December 2020.
"No-deal" easements cancelled
On 10 February 2020, the UK Government confirmed that it would impose import controls on EU goods entering the UK after the end of the transition period. Businesses and advisers, however, were expecting that the various procedures which were designed to ease inevitable border-strain in the event of a no-deal Brexit would apply at the end of the transition period.
These easements included the Transitional Simplified Procedures which would have allowed goods to clear customs more quickly. The 10 February announcement by the UK Government confirmed that these measures will not now be introduced. This means that importers, particularly those who have only traded with EU countries up to now, will need to focus on preparations for submitting customs declarations and making payment of any tariffs assessed on arrival of goods from other EU countries.
VAT Deferred Accounting available from 1 January 2021
Among the easements announced in no deal exit preparations was deferred VAT accounting, a measure allowing importers to account for VAT on their VAT return rather than at the time of releasing goods into the UK. Up until the UK Budget announced by Chancellor Rishi Sunak on 11 March it was assumed the deferred VAT accounting was included in the easements not to be reintroduced. However, page 95 of the Budget 2020 Statement contains confirmation that not only will importers from the EU be able to account for VAT on their VAT return, but so will all importers of goods into the UK from 1 January 2021.
UK and EU EORI numbers
One of the administrative hurdles importers will need to tackle at the end of the transition period is that presented by Economic Operator Registration and Identification (EORI) numbers and their application post-transition - for more details see our previous blog here. Businesses trading with the EU only do not currently need an EORI number, but after 31 December 2020 they will. The UK Government has issued UK EORI numbers to VAT registered businesses, however businesses should check that they have received their EORI number and contact HMRC if they haven't. Non-VAT registered businesses who trade solely with the EU should also apply for an EORI number (you can apply here).
EORI numbers issued in the UK at the moment will no longer be valid after the end of the transition period. This means that businesses with a UK EORI number may also need to apply for an EU EORI number if they will act as the importer of record when their goods are imported into the EU. Some EU customs authorities are now issuing EU EORI numbers to businesses with a UK EORI number.
There is also the question of whether EU and other overseas businesses with an EU EORI number will need to apply for a UK EORI number to bring goods into the UK after 31 December 2020. Previous UK Government guidance suggested that EORI numbers originating from within the EU would be accepted in the UK for a short period post-Brexit to assist in the transition; but this guidance appears to have been removed. The UK Government's announcement on 10 February suggests that EU businesses acting as importer on record in the UK will also need to apply for a UK EORI number in advance of 31 December 2020.
Start preparing now for 1 January 2021
While it is assumed advice is being given to importers arriving at ports throughout the transition period, many businesses will still be unaware of the restrictions that will be in place from 1 January 2021. Moreover, even businesses that are prepared with EORI numbers and a customs declaration procedure in place for the border, may be caught in congestion around the new border infrastructure.
This recent Government announcement does not apply to trade between Northern Ireland and Ireland, or Northern Ireland and Great Britain. Different arrangements are being made for trade between Northern Ireland and Ireland, and current government guidance suggests that an EORI number will not be required for trade between the two.
Our advice to clients is as it always has been, but with added urgency:
- take customs and VAT advice to understand the new requirements from 1 January 2021; and
- obtain a UK EORI number, and if necessary, an EU EORI number as soon as possible before 31 December 2020.
For businesses requiring assistance to prepare for dealing with customs declarations, HMRC has extended the deadline to apply for grant funding.
If you have any questions please get in touch with your usual Brodies contact, or e-mail Isobel d'Inverno, Karen Davidson, Heather Gibson or Rebekah Leviston at from our Corporate Tax & Incentives team.