Post Brexit Britain – keep calm and keep preparing

16 January 2019

Whilst the political furore continues following the vote on Mrs May’s Brexit Deal, and we wait to see the outcome of our democratic process, what can businesses do to carry out meaningful steps to protect their international trading activity?

What to do next to prepare for Brexit

What to do next to prepare for BrexitThe message from HM Government (HMG) and HM Revenue & Customs (HMRC) is clear. Businesses should proactively prepare for Brexit and any potential new challenges which lie ahead when continuing to ‘do business’ with the European Union (EU).

So, taking this view, business who buy and sell goods intra-EU, should take steps to prepare for a ‘no deal’ Brexit scenario, which means that if the UK leaves the EU on ‘day 1’ without a deal, the UK effectively becomes a third country. Amongst other requirements, this may result in the need for businesses to submit import and export declarations, in respect of the movement of goods within the EU.   

In the event of a ‘no deal’ outcome, some of the main areas of consideration and concern for businesses include; the continuity and speed of their supply chains to fulfil existing contracts, the additional administrative burden, upskilling for employees, new statutory obligations, changes in processes and procedures and the associated cost to the business.

Businesses likely to be significantly affected by a ‘no deal’ outcome are those which currently deal exclusively with the EU, often referred to as intra-EU trade.

Whilst those businesses which currently trade with both the EU and ROW may be more familiar with customs reporting requirements and obligations, they will still have to plan to extend their business model to incorporate the same changes in respect of their existing intra-EU supply chain. 

In the background, the UK has submitted draft new national schedules of tariffs and equivalent charges on UK imports of goods to the World Trade Organisation (WTO), to come into effect when the UK leaves the EU. Without a future economic and trade agreement in place with the EU, UK exports to the EU may be subject to tariff rates charged by the EU. The UK may also charge tariff rates on imports from both the EU and countries outside of the EU, which would form the basis of any subsequent UK Trade Tariff.         

A static estimate provided by HMG of the administrative burden of a ‘no deal’ exit for UK businesses, representing import and export declarations, was in the sum of £6.5 billion. Over half of this figure relates to import declarations. Each individual declaration is estimated to cost business between £25- £55.

HM Treasury and HMRC will lay a number of Statutory Instruments (SI) under the Taxation (Cross-border Trade) Act 2018 and the EU Withdrawal Act 2018. Details have already been published, along with, an impact assessment for the movement of goods if the UK leaves the EU without a deal. They are designed to broadly align and mirror the current EU legislation.

Brexit 9-Step Action Plan for your business:

  1. Register with HMRC for an EORI number which is an identification number, unique to each business, which you will need in order to trade.
  2. Verify whether the goods you export to the EU will require a licence or are subject to any special rules in respect of their movement.
  3. Establish the correct commodity code for your goods. This will assist you to identify the amount of UK import duty payable, if duty can be suspended, if you can apply for any preferential duty rates and whether you may need an import licence.
  4. Consider how you will make your declarations to HMRC and whether this will be facilitated through a third party, such as a freight forwarder or a customs broker.
  5. Establish the correct customs procedure code for your goods. If you choose to make your declaration via a third party, you will need to provide clear instructions relating to the treatment of your goods.
  6. Consider whether you are eligible to apply for and use any customs procedures which may provide relief from the payment of duty to HMRC. These provisions may include: use of or approval to operate a Customs Warehouse facility, Temporary Admission, Inward Processing Relief, Outward Processing Relief, Authorised Use, Transit Procedures and Temporary Storage facilities.   
  7. Consider your INCOTERMS or shipping terms. The shipping terms agreed between the contracted parties i.e. the supplier and purchaser may denote the risk and liability for the movement of the goods, including the liability for any UK import duty.
  8. Establish the correct valuation for your goods, which will be used when UK import duty is calculated.
  9. If your supply chain is going to evolve and you will import direct into Europe for your European market, VAT registration in the country of importation may be necessary.

Our action plan is a pro-active approach and will help businesses to get ahead in a Post-Brexit landscape.

Our view is that Customs Duty suspension regimes will be vitally important in preventing a potential Double Duty Dip. These require care and attention to implement but as Customs Duty is an outright cost to business, the payback is well worth the effort. Being a holder of such a regime marks out the business as proactive, compliant and forward thinking, which will be important to future success in whatever brave new world awaits us.

The right Brexit experts for your business

We have an experienced team who will approach Brexit with a practical can-do attitude. Our Customs Duty expert is a senior HMRC Brexit strategist and led the Customs team dealing with AEO and Duty suspension regimes.

Our VAT team work closely with our global VAT teams and can provide holistic advice from whichever jurisdiction you are considering.

Please contact Indirect Tax Partner, Alison Horner or Senior Customs Duty Manager, Lucy Sutcliffe if you would like to discuss your Brexit strategy. 

If you found this article interesting and also want information on what impact a “no deal” Brexit will have on your workforce. Please read Partner, Chris Blundell’s Insight article here.

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