From 1st January 2021, the transition period with the European Union (EU) will end, and the United Kingdom (UK) will operate a full, external border as a sovereign nation.
This means that controls will be placed on the movement of goods between the UK and the EU.
The UK Government will implement full border controls on imports coming into the UK from the EU.
Recognising the impact of coronavirus on businesses’ ability to prepare, the UK Government has taken the decision to introduce the new border controls in three stages up until 1 July 2021.
The stages are:
- From January 2021: Traders importing non-controlled goods (covering everything from clothes to electronics), will need to prepare for basic customs requirements, such as keeping sufficient records of imported goods.
For January 2021, you must:
- Understand the requirements of EU Member States. The necessary processes must have been done and documentation completed to comply with these requirements.
- Obtain a UK EORI number to move goods to or from the UK. Check EORI number and apply for a new one if it does not start with UK.
- check which goods are on the controlled goods list (such as alcohol products, tobacco products, hydrocarbon oils, biofuels and fuel substitutes, road fuel gases, goods subject to Climate Change Levy, tobacco product manufacturing machines, controlled drugs, toxic chemicals, fishery products, etc.). If goods are on the controlled goods list, it will be necessary to complete full customs declarations from January.
- For importations of non-controlled goods, decide whether to delay the customs declaration for up to six months or complete full customs declarations on import.
- Decide how to complete customs formalities: most traders are expected to use a customs intermediary. These are experts who can make declarations on your behalf.
- For importations of live animals or high-priority plants and plant products (e.g. Machinery and vehicles which have been operated for agricultural or forestry purposes, plants for planting, seeds etc.), traders need to be prepared for submitting additional documentation and checks taking place at point of destination.
- be prepared to submit customs export declarations from January (for exporters).
You do not need to
- Submit Safety and Security (SES) declarations.
- Submit full customs declarations at the point of import, if you are importing a non-controlled good and you decide to delay your declaration for up to six months.
- From April 2021: All products of animal origin (POAO) – for example meat, honey, milk or egg products – and all regulated plants and plant products will also require pre-notification and the relevant health documentation. Any physical checks will continue to be conducted at the point of destination until July 2021.
For April 2021, you must:
- If traders are importing Products of Animal Origin (POAO) or a regulated plant and plant product, traders must be prepared to submit pre-notification and the relevant health documentation.
You do not need to-
If you are not importing Products of Animal Origin or a regulated plant, you do not need to make any changes from January 2021 requirements.
- From July 2021: Traders MOVING ANY GOODS will have to make full customs declarations at the point of importation and pay relevant tariffs, delaying declarations will not be possible. Full S&S declarations will be required, while for commodities subject to sanitary and phytosanitary (SPS) controls, these must arrive at an established point of entry with an appropriate BCP and there will be an increase in physical checks and the taking of samples. SPS checks for animals, plants and their products will take place at UK BCPs. The GVMS will be in place for all imports, exports and transit movements at border locations which have chosen to introduce it.
From July 2021, you must-
- Meet full customs requirements including submitting declarations, regardless of whether it is a controlled or a non-controlled good, as well as paying VAT and excise duty where necessary
- Submit Safety and Security declarations
- Be prepared for customs compliance checks either at port or an inland site
- Be prepared for relevant SPS goods to enter the UK via a Border Control Post either at port or an inland site, accompanied by SPS documentary requirements. You must not –
- Fail to complete customs, VAT and excise requirements
- Fail to submit goods to any necessary physical and documentary checks at the UK Border Control Posts.
DEFERRING PAYMENT OF VAT AND DUTIES
VAT – Postponed VAT Accounting
HMRC has announced that from 1st January 2021, goods imported by UK VAT registered businesses from the EU, as well as third countries, will be able to account for import VAT on their VAT return. This will give importers a cash flow benefit as import VAT will not have to be paid immediately to clear the goods through Customs.
Import VAT can be accounted for on the importer’s VAT return if:
- The goods imported are for use in the importer’s business;
- The importer’s EORI number, which starts with “UK”, is entered on the customs declaration;
- The importer’s VAT registration number is declared on the customs declaration.
This procedure is known as “Postponed VAT Accounting”.
UK importers will be able to access an online monthly statement which they can download and keep for their records. This statement will show the total import VAT postponed for the previous month which should be included on the VAT return. Owing to postponed VAT accounting, there will be changes to the way UK importers complete boxes on their VAT returns.
- DUTIES – duty deferment account
With regards to Duties, after 1st January 2021, the Duty Deferment Account (DDA) can be used to defer payment of tax. A DDA allows holders to delay customs duty, excise duty and import duty, to be paid once a month rather than on individual consignments. If traders import goods regularly, they can apply for a “duty deferment account” to delay paying most customs or tax charges, for example: customs duty, excise duties and import VAT (non-VAT registered entities) up to £10,000 a month, for higher amount a bank guarantee will be required. Traders can also apply to delay paying duties on goods released from an excise warehouse.
A duty deferment account let them make one payment a month through Direct Debit instead of paying for individual consignments.
Traders can apply for a duty deferment account if they are an importer or someone who represents importers or if they and their businesses are established in the UK.
To date it seems non-resident traders cannot benefit from the above scheme unless they have a subsidiary or permanent establishment in the UK.
If the application is approved, traders will get a deferment approval number together with the agreed amount of deferral limit. They can give someone authority to use your duty approval number in their duty deferment application, such as your freight forwarder or courier.
The EC acknowledges that the changes to the VAT Directive will require some IT adjustment. Therefore, the EC is encouraging all member states to agree to the proposal so that it can be implemented before the end of the transitional period.
VAT RULES FOR NOTHERN IRELAND
With regards to VAT rules for Northern Ireland, with effect from 1st January 2021, the European Commission (“EC”) has recently published proposed changes to the EU VAT rules in preparation for the end of the transitional period with the UK.
The proposal introduces a special identification number for businesses in Northern Ireland, so that EU VAT provisions can be applied to goods traded in Northern Ireland. In effect, when the transitional period expires on 31 December 2020, goods sold and transported from Northern Ireland to the EU (and vice versa) will be treated as if they were cross-border supplies of goods within the EU.
There are a number of changes to the UK VAT system that are being introduced on 1st January 2021 specifically targeting ecommerce businesses and how they account for VAT. While some of these changes are a direct result of the UK leaving the EU, others (targeting ecommerce businesses) were planned by the EU before BREXIT.
Due to the coronavirus pandemic, the EU has postponed its changes to ecommerce VAT until 1st July 2021, while the UK has not. This difference in EU/UK VAT approach causes an additional complication for 6 months.
To follow the four major changes that will be introduced to the UK VAT regime on 1st January 2021:
- Scrapping of the £15 Low-Value Consignment Relief (LVCR): the LCVR currently means that goods valued at £15 or less are not subject to UK import VAT. Removing the LVCR means that for goods sold at £135 or less, sellers or their postal service will have to declare and pay VAT to HMRC directly.
- The postponed import VAT scheme: as per above, the import VAT needs to be declared on the UK VAT return.
- EU Distance Selling Thresholds (DSTs) no longer applicable to UK sales. Between 1st Jan 2021 and 30th June 2021, UK ecommerce businesses selling goods from the UK to EU consumers will no longer count these sales as distance sales. Instead, they will be counted as UK exports and zero rated for UK purposes.
- EC Sales Lists (ECSLs) will be scrapped for UK businesses. From 1st January 2021 UK businesses will no longer be able to make EC Sales, so will no longer be required to submit and complete ECSLs
EU businesses that sell goods from the EU directly to UK consumers will need to register for UK VAT.
Note: From 1st July 2021 the VAT MOSS scheme will be expanded from digital products to include physical products. At this point a UK business will be able to make distance sales into the EU via the scheme without needing to directly register in each EU jurisdiction.
Laggan & Associates Ltd