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Given that we don’t know what the trading arrangements between the UK and the EU post-Brexit will be, and with a no-deal scenario looking like a possibility, on the 23rd August 2018, the UK Government published the first of 84 documents providing guidelines on trading with the European Union if a Brexit deal is not agreed. If this happens, the UK will leave the EU without an arrangement in place with the EU for the post-Brexit period, which will have an immediate impact on UK businesses trading with the EU.
How likely is it that the UK will leave the EU with no deal?
Given the mutual interests of the UK and the EU securing a negotiated outcome, it’s unlikely that the UK will leave the EU without an agreement in place. According to guidance issued by the Government, negotiations are progressing well and both parties are working hard to reach a favourable deal. Regardless of the outcome, the Government needs to ensure the UK is ready from day 1, so until a deal is agreed, the Government has a responsibility to prepare for all eventualities, and that’s why it has issued guidance for UK businesses.
What would happen to customs and excise procedures in a 29 March 2019 ‘no deal’ scenario?
If the UK left the EU on 29 March 2019 without a deal, there would be immediate changes to the procedures that apply to businesses trading with the EU. It would mean that the free circulation of goods between the UK and EU would cease. Companies will, therefore, have to apply the same customs and excise rules to goods moving between the UK and the EU as currently used in cases where goods move between the UK and a country outside of the EU. Customs duty may also become due on imports from the EU.
These changes would mean a customs declaration will be needed when goods enter the UK (an import declaration) or when they leave the UK (an export declaration). Separate safety and security declarations will also need to be made by the carrier of the goods – such as the shipping line or the airline.
What are the implications for VAT rules for goods and services traded between the UK and EU member states?
If the UK leaves the EU with no deal, there will be some changes to VAT rules and procedures that will apply to transactions between the UK and EU member states.
Imports
If we do have a no Brexit deal, the government will introduce postponed accounting for import VAT on goods brought into the UK whether they originate from the EU or non-EU countries. UK VAT registered businesses will be able to account for import VAT on their VAT return rather than paying it on or after their goods arrive in the UK. Customs declarations and any other duties will still have to be paid, and further detail on accounting and record keeping will later be released.
Exports
Exporters to EU companies will need to pay the local VAT and tariffs due in those locations as these transactions will no longer be intra-community supplies.
Small e-commerce businesses exporting goods to EU countries will no longer be permitted to sell goods based on their UK VAT registration up to the distance selling threshold. They will need to register and file foreign VAT returns.
What can businesses do to prepare themselves for a no-deal Brexit?
Businesses in the UK need to consider how a ‘no deal’ scenario could affect them and may wish to begin taking mitigating actions against such a risk, even though it’s unlikely. The guidelines provide details on customs and excise to help businesses understand the potential impacts, and the UK government will give more information, including specific actions that companies should take, in due course. In the meantime, businesses can take the following steps now to help them prepare:
- Understand what the likely changes to customs and excise procedures will mean to their company in light of the Government guidelines.
- Consider the volume of their trade with the EU and any potential supply chain impacts such as engaging with the other businesses to ensure that the necessary planning is taking place at all levels of the supply chain.
- Consider the impact on their role in supply chains with EU partners. If the UK and the EU do not have a Free Trade Agreement (FTA) in place in a ‘no deal’ scenario, trade with the EU will be on non-preferential, World Trade Organisation terms. This means that Most Favored Nation (MFN) tariffs and non- preferential rules of origin would apply to consignments between the UK and EU.
- If necessary, put steps in place to renegotiate commercial terms to reflect any changes in customs and excise procedures and any new tariffs that may apply to UK-EU trade. Look at the existing guidance for importing and exporting outside of the EU on GOV.UK to familiarise themselves with the key processes.
- Consider how they will submit customs declarations for EU trade in a ‘no deal’ scenario, including whether they should engage the services of a customs broker, freight forwarder or logistics provider to help, or secure the appropriate software and authorisations.
- Register for the HMRC’s EU Exit update service. On GOV.UK, search for ‘HMRC videos, webinars and email alerts’, click to register to get business help and education emails, enter your email and select ‘EU Exit’.
Where can I find more detailed information?
Further information and the full guidance notices can be found here: How to Prepare if the UK leaves the EU with no deal.
Technical notices that will be of particular importance to importers and exporters are listed below:
Trade remedies if there’s no Brexit deal
Trading with the EU if there’s no Brexit deal
Classifying your goods in the UK Trade Tariff if there’s no Brexit deal
Exporting controlled goods if there’s no Brexit deal
VAT for businesses if there’s no Brexit deal
At John Good Logistics, we’re experts in importing and exporting all over the world, and we’ll help our customers navigate their way through any changes post-Brexit to make the process as simple as possible whatever the outcome on 29 March 2019. If you need any further information about how you can prepare for a no-deal Brexit, contact our team who will be more than happy to help.