Last reviewed 31 August 2018

Following the latest Brexit news issued by the Government, John Davison provides an update for all businesses that import and export to or from the EU, or have traders in their supply chain that supply to or from the EU.

It is looking increasingly likely that the UK will be leaving the EU with no deal. The EU and the UK have issued notices regarding a no-deal Brexit. These notices cover many issues, such as transport, technology, the environment and trading with the EU.

The EU has indicated that it intends to treat the UK as a third country for all purposes on Brexit. This will mean regulations and tariffs at borders, checks and controls for customs, sanitary and phytosanitary standards and verification of compliance with EU rules and norms.

The Government has stated, however, that these preparations do not indicate an increased likelihood of a no-deal outcome, but it is to ensure that plans are in place if this occurs. Links to the official notices issued by the Government are provided at the end of this article.

Trading with the EU if there is a no-deal Brexit

Issues that the Government suggest businesses need to consider include:

  • preparing to apply customs and excise rules, such as import and export customs declarations, to goods moving between the UK and EU

  • accounting for VAT and duty charged on goods moving between the UK and EU

  • determine the tariff code (classification) of goods that need to be declared

  • carriers also need to make separate safety and security declarations

  • the Excise Movement Control System will no longer be used for movements of goods between the EU and the UK, but can still be used within the UK

  • determine if any import licences are necessary for goods being imported from the EU.

Businesses that currently do not import or export goods from and to countries outside the EU, but will import goods from the EU after 29 March 2019 will need to register for an Economic Operator Registration and Identification (EORI) number. Their contracts will also need to conform with International Commercial Terms (Incoterms). Importers may also wish to appoint a customs broker, freight forwarder or logistics provider to assist with imports and exports or alternatively acquire the necessary software and authorisations from HM Revenue & Customs (HMRC). Businesses also need to consider if they need to take advantage of various customs reliefs, such as warehousing, temporary admission rules, inward or outward processing reliefs and specific or end-use reliefs.

VAT if there is a no-deal Brexit

The current VAT system will continue to exist after 29 March 2019. There will, however, be a few changes. Goods coming from the EU will no longer be acquisitions, but imports. Goods sent to the EU will no longer be despatches but exports. The UK Government will introduce a postponed accounting scheme so that goods imported from the EU will not need to account for VAT on import but will account for VAT on the VAT return (and can claim back any VAT paid on the same return, subject to the normal VAT rules). This postponed accounting rule will be extended to goods imported from other third-party countries as well. It should be noted that parcels sent from the EU will no longer benefit from the Low Value Consignment Relief rules, so VAT will need to be accounted for on any parcels arriving into the UK (unless the goods are zero-rated). For parcels valued up to £135, it is intended that the VAT will be collected from the overseas business selling the goods into the UK through a digital service. Vehicles imported from the EU will continue to be notified to HMRC using the Notification of Vehicle Arrivals (NOVA) procedures.

When goods are sold into the EU it will be necessary to plan for any VAT and customs consequences. In particular, the current distance selling arrangements will no longer apply. The sale of the goods will be zero-rated by the UK supplier and the importer will be liable to account for duty and VAT. UK business will also no longer need to complete EU sales lists, but proof of export will need to be retained.

Where services are supplied it will be necessary for businesses to review the “place of supply of services” rules. In particular, where digital services are supplied the place of supply is where the customer resides, and it will be necessary to account for VAT in the Member State where the customer resides.

On leaving the EU, the UK will no longer be a part of the current EU VAT Mini One Stop Shop (MOSS) system. Businesses that currently use this system will need to register for the MOSS non-union scheme.

No-deal Brexit notices

Guidance on how to prepare for Brexit if there’s no deal.

EU Brexit preparedness notices

Notices and their consequences in a range of policy areas.