The Brexit phenomenon, once an abstract concept, has now translated into a tangible reality for businesses in the United Kingdom. One of the most challenging aspects post-Brexit is the new rules of trade that companies have to familiarise themselves with, especially concerning the import of goods from the European Union. The Trade and Cooperation Agreement (TCA) has introduced new rules for businesses, and these rules are at once complex and confusing. Here, we will explore how businesses can navigate these new regulations and continue their trade smoothly.
Value Added Tax (VAT) plays a crucial role in the import of goods. How VAT is applied to imported goods has changed significantly following Brexit. You, as businesses, must fully understand these changes to make strategic decisions about your imports from the EU and beyond.
Post-Brexit, VAT is now due on all goods imported to the UK, regardless of their origin. Before Brexit, intra-EU supplies were exempt from VAT, but this is no longer the case. The UK government has introduced a postponed VAT accounting system for goods imported from anywhere in the world, not just the EU. This means UK businesses will account for import VAT on their VAT return rather than paying import VAT on or soon after the goods arrive at the UK border.
For goods valued below £135, the VAT is now collected at the point of sale rather than the point of importation. This means that overseas businesses selling such goods into the UK are required to register and account for UK VAT to HMRC.
Customs duties and tariffs are among the most significant changes post-Brexit. These costs, which were previously non-existent for the import of goods within the European Union, have now become a reality for UK businesses.
The UK is now outside the EU’s customs union and single market, meaning businesses must now deal with customs duties and additional paperwork for their imports. The specific type of customs duty applied depends on the goods' nature and the country from which they are imported.
Under the TCA, goods of UK or EU origin may be eligible for zero tariffs and zero quotas. However, it is essential to note that this depends on meeting certain rules of origin criteria. This means you will need to prove that the goods were mainly manufactured or undergone substantial transformation in the UK or EU.
With the UK’s formal exit from the EU, new import rules and regulations have been enforced that businesses must comply with to continue their trade operations smoothly.
Goods imported into the UK from anywhere in the world, including the EU, now require a customs declaration. Should you fail to provide this, you could face delays, disruption to your business, and potential financial penalties. It's also worth noting that many businesses choose to employ a customs intermediary to handle this process and ensure everything is done correctly.
Furthermore, businesses must now use the correct commodity code for their goods. This code is used to classify the goods and determine the rate of duty and whether any restrictions apply to your product. Failure to use the correct code can again result in penalties and delays.
With all these new rules and regulations in place, the business ecosystem in the UK has undeniably been impacted. However, by understanding these changes and adapting accordingly, businesses can do their part to minimise disruption and continue to thrive post-Brexit.
The fundamental key is knowledge. Understanding the changes, being aware of the new obligations, and knowing how to comply will be crucial for businesses in the UK. Companies will need to invest time and resources into training staff, updating systems and processes, and, in some cases, restructuring their business model to ensure they are compliant with the new rules.
As businesses, you have no choice but to embrace these changes. The UK is now a third country in relation to the EU, meaning the rules that apply to non-EU countries now apply to the UK. But with the right knowledge and preparation, these changes can be navigated successfully.
It's also worth noting that as the situation evolves, so too will the rules and regulations. Keeping abreast of any changes is essential to ensure you stay compliant and avoid any unnecessary disruptions to your operations.
Despite the challenges, Brexit also presents opportunities. The UK now has the freedom to forge its own trade agreements with countries outside the EU. This could open up new markets for businesses, offering potential for growth and expansion. By staying informed, adaptable, and resilient, you can navigate the post-Brexit landscape and continue to thrive in this new era of trade.
One of the most significant changes is the introduction of rules of origin, a determinant of the economic nationality of a product in international trade. Recognising and complying with these rules is crucial for businesses to benefit from tariff-free access to the EU market.
Rules of origin are used to establish if a product may be considered as sufficiently 'made in the UK' or 'made in the EU'. Goods that qualify can be traded without having to pay tariffs. However, these rules are complex and need careful consideration to ensure compliance. Incorrect or inadequate documentation can lead to costly delays and the imposition of tariffs. Therefore, it's essential to understand how your products are classified under these rules.
Another challenge faced by UK businesses post-Brexit is disruptions in their supply chains. Cross border movements are no longer seamless, and the additional customs checks and paperwork have resulted in delays and increased costs. Businesses now need to navigate this new landscape and find ways to ensure their supply chains remain resilient. This may involve diversifying suppliers, reshoring operations, or investing in digital technologies to streamline processes and increase visibility across the supply chain.
The Northern Ireland Protocol presents a unique challenge for businesses. Under the Protocol, Northern Ireland continues to align with the European Union's Single Market rules, creating a de facto customs border down the Irish Sea between Northern Ireland and the rest of the United Kingdom.
This means that goods moving between Northern Ireland and the rest of the UK are subject to customs declarations and checks. UK businesses now need to account for these additional procedures when planning their import-export activities with Northern Ireland.
Businesses also need to familiarise themselves with the Trader Support Service (TSS), a free-to-use digital service that guides businesses through the process of moving goods under the Protocol. This includes helping businesses in getting an EORI number, a unique ID code used to track and register customs information in the EU.
Brexit has undeniably marked a new era for businesses in the United Kingdom. The transition from being an insider of the EU to operating as a third country has brought about significant changes and challenges, particularly in the domain of importing goods.
However, with a clear understanding of the new rules and regulations, including VAT rules, rules of origin, and the unique rules for Northern Ireland, businesses can navigate this new landscape. Preparation, adaptability, and resilience are the keys to successfully conducting international trade in the post-Brexit era.
While the changes may seem daunting, they also offer opportunities. With the freedom to negotiate its own trade deals, the UK has the potential to establish new trading relationships outside the EU. For businesses, this could mean access to new markets and customers, offering possibilities for growth and expansion.
By embracing these changes, UK businesses can continue to thrive, demonstrating the resilience and innovation that characterises the UK's business sector, in this new era of international trade.