Post Brexit Planning – 10 key tips for 2022
Post Brexit Update
It is hard to believe that more than a year has passed by since we were at fever pitch with the uncertainty caused by a Brexit Deal or No Deal.
The trade agreement was finally announced on Christmas Eve and the UK began its Post Brexit era on 1st January 2021. Not all the UK though, as Northern Ireland (NI) has been the exception having a foot in both the EU and UK. This has led to much complexity and attempts to ensure a smooth and uninterrupted flow of goods into Northern Ireland from the UK has resulted in ferocious press and protests and disputes with the EU.
In the first few months of 2021 trading cross border was kept to a minimum and when trade started to increase there were many delays and problems. Consignments were stuck at ports and incurring large costs for clearance and demurrage. Covid and the Ever Given Suez blockage only compounded the position and led to lack of capacity as well as significant price increases for containers and agents.
Even now, over a year on, there is a crisis in supply chains and part of this is down to the Covid crisis and containers with PPE being on the wrong side of the world which is causing delays in getting global supply routes moving again.
The Northern Ireland protocol and the Trader Support Service (TSS) have been particularly difficult to navigate and many traders using the fast parcel operators have been in a fortunate position of being exempt from the complex rules. As we all know there is much political unrest between the UK and EU over the operation of the protocol and businesses trading with NI will need to keep a close eye on
developments and changes. Our own experience has showed us that for just a simple movement of goods to NI it took 2 hours to complete the TSS declaration. To compound matters further we saw significant changes to EU VAT and in particular e-commerce sales.
Here are our 10 key tips for calmer trading conditions for 2022.
The importance of Incoterms
Incoterms underpin the import responsibilities and where the risk for the transport, insurance and delivery of the goods rest. As all goods moving into or out of the UK are now exports or imports these terms must be identified as
part of the transaction. Delivered Duty Paid (DDP) means you as the seller have import responsibilities you perhaps hadn’t bargained for. Whereas agreeing Delivered at Place (DAP) terms means the customer takes on those responsibilities.
To be able to move and clear goods as an import or export, the standing data and basic details need to be communicated properly in the paperwork provided to the logistics company. This means commercial information such as the correct commodity codes, incoterms, the exporters and importers details and their EORI and VAT numbers. We can often trace a problem back to this initial data not identifying the right importer or not having the very important EORI number in the data.
Having the right type of customs agent representation to clear goods
This has been one of the key issues in post Brexit trade. UK businesses importing into the EU and which do not have a business entity or establishment in the EU, will need to have an indirect representative. This type of agent is jointly and severally liable for Duty and VAT debts.
Therefore, the high level of risk means it is very difficult for UK businesses to find the support they need in this area. It is an issue which takes time and cost to resolve.
Do not claim back overseas VAT on the UK VAT return
If you incur European VAT there is a special refund service which results in claims being made to each EU country.
All the countries have different requirements and, in some instances, fiscal representation. Incurring EU VAT on goods raises questions to us as advisers. For example, should your business be VAT registered in that country? These are also the sorts of questions the tax authorities will ask. If you are buying and selling goods in the EU you must be aware that this is most likely to result in a VAT registration obligation. Different countries have different rules.
This is a useful information source to track your customs compliance in respect of imports into the UK. It costs £20 a month but lists all imports made in your name, the commodity code and other useful information. As an
importer you have compliance responsibilities, it is not the agent’s responsibility to make sure it is correct. There are still many delayed declarations being made by agents and to ensure you can monitor your imports this is a good tool. Next year a new customs clearance system will be implemented by HMRC so by the end of 2022, it is hoped that importers will be able to view all relevant information through their gov.uk account.
Rules of origin
It is a general misunderstanding that the free trade agreement means no tariffs on cross border trade. Whilst the UK has lowered many tariffs to 0% the crux of tariff free trade relies on meeting complex rules of origin.
The rules relating to this are tightening up in 2022 meaning UK exporters will need to ensure that satisfactory evidence is available to demonstrate the exported goods meet the applicable rule of origin. Any company providing a statement of origin on its commercial invoice will need to have this evidence, otherwise the claim for preferential status will be denied by HMRC.
Depending on the rule of origin, this could require declarations to be obtained from all UK, and even EU, suppliers of materials and components. We are expecting the UK to be subject to request for verifications of origin declarations in 2022 so UK exporters must ensure they have the required evidence, or its EU customers face the prospect of receiving customs duty assessments from its local customs authority.
Selling B2C into the EU may result in VAT registration
Simplification procedures such as OSS or IOSS will help to minimise the reality of multiple EU VAT registrations. This will mean just 1 return for all EU sales which are Business to Consumer (B2C). This also includes the sale of digital and other services to consumers.
Customs relief regimes
Businesses which import goods for manufacturing, processing or repair should seriously look at the following regimes to minimise that bottom line cost of Customs Duty.
- Customs warehousing
- Inward processing relief
- Returned goods relief
Postponed VAT accounting
The UK Government introduced postponed VAT accounting (PVA) which enables the importer to account for the import on the VAT return rather than paying import VAT up front and then claiming it back a month or so later. It is a great cash flow benefit but has had its teething problems. By using PVA you are not paying agents fees unnecessarily for using their deferment accounts to clear goods.
Duty Deferment Account
Get a Duty Deferment Account if you are incurring Customs Duty as this ensures minimal delay on customs clearance and reduces agent fees for use of their deferment. Since January, guarantee waivers can be authorised by HMRC to further minimise any additional costs of having a deferment making this a effective way of managing your UK duty liabilities.
International trade has many Customs Duty and VAT consequences. MHA and the Baker Tilly network can help you navigate all of these issues to support your business.
Get in touch
For help with your post-brexit planning and how your business can adapt its processes, please contact a member of our Indirect Tax Team using our online enquiry form.