On January 31, 2020, the United Kingdom (UK) got officially separated from the EU after the public vote held in June 2016, which was in favor of this deal. Thus, the UK is no more an EU member. The transitional period shall end on December 31, 2020, and after that, the UK will be out of the EU. The import and export terms for importation to an EU state from another EU state differ from those between an EU country and a non-EU country. But since the UK has ceased to be an EU member, the import and export terms have also changed significantly.
October 5, 2020, marks the day when the UK tax authority changed its Brexit guidance for businesses on the value-added tax rules, which shall apply to goods entering Great Britain from outside the UK.
UK Import Duty: Changes from January 2021 Onwards
The UK government will put forward a new model for the VAT (Value Added Tax) on goods that get imported to the UK from other European nations. As the UK is a non-EU country now, it shall treat goods being imported from EU-countries the same way it treats the goods from non-EU countries. The UK government has declared that after the transitional period, from January 2021 onwards, all imports and exports will be treated equally.
What you must know here is that the UK will start collecting VAT at the point of importation instead of the point of sale. This rule is applicable for goods valued at or less than £ 135. On such goods, UK supply VAT and not UK import VAT will be due.
EORI Number
If your business wants to continue importing goods to the UK, you need to make sure that your business has its unique EORI number. EORI number stands for Economic Operator Registration and Identification Number. It is a 12-digit number starting with GB. There are two exceptions where a business does not need an EORI number:
- If the business is service-based, it indulges in fields providing ‘intangible’ services such as those related to education, consulting, entertainment, or media
- If you want to transport goods between Ireland and Northern Ireland
And if you do not have an EORI number, you will have to face delays and high costs while importing goods.
Custom Declaration
If your value-added goods are exported from an EU member country, you need to complete a customs declaration. Therefore, traders in both the EU and the UK need to need to submit a customs declaration. Once the goods reach Great Britain, they need to go through other relevant customer procedures.
In other words, if you own a UK-based business and you import goods from outside of the UK, you must complete an import declaration first. This import declaration is also called a custom declaration. Custom declaration completion is a tad bit complicated process and requires complaint software usage. It can be submitted through the Customs Handling of Import and Export Freight (CHIEF) system.
Custom Freight Simplified Procedures
Customs Freight Simplified Procedures (CFSP) is an electronic customs system for imported goods from another country. Customs Freight Simplified Procedures (CFSP) can be used to import excise goods like alcohol and tobacco. All other excise goods are not included in using CFSP. This fact implies that importing goods to Great Britain will be easier for you. It means you will be able to transport goods to Great Britain without making a full customs declaration in advance.
CFSP is meant to make things easy for businesses that frequently import to the UK. It is important to note that CFSP is not compulsory for your business. You may or may not use it. But you are always recommended to use it. It allows faster dispatch of goods from non-European counties. There are two CFSP procedures:
- Simplified Declaration Procedure (SDP): SDP is used to release goods at the frontier to the customs procedures.
- Local Clearance Procedure (LCP): LCP is useful for moving goods from frontier to storage and at last move them to custom procedures.
Business to Business Rules Changes
The new rules also apply to business to business sales whose value does not go beyond GBP135. The changes do not apply to consignments of goods containing excise goods. The non-commercial transactions between private individuals are also excluded. If your business customer is VAT registered in the UK and provides you with a valid registration number, the VAT will be accounted for by the customer.
Moving Imported Excise Goods Within Great Britain
Excise goods like alcohol, tobacco, and certain oils have some changes concerning their movement in Great Britain after importation. Once the excise goods enter Great Britain, you need to use the Excise Movement and Control System (EMCS) to move them inside Britain.
The Excise Movement and Control System is an electronic system of monitoring the movement or transportation of excise goods. It is a real-time recording system for the movement of goods like alcohol, tobacco, and energy products. You also need to pay excise duties for these goods. Following are the steps you need to follow to ensure completely authorized movement of excise goods within great Britain:
1. Appoint a Consigner
You have to appoint a registered consigner to move the goods across the nation. Having a registered consigner is crucial for the movement of goods within the country. A registered consigner submits an electronic administrative document (eAD) through EMCS before the movement can start.
2. Get the ARC
Once the consigner completes the electronic administrative document’s submission, a unique Administrative Reference Code (ARC) is generated. Every time the goods travel within Great Britain, the ARC code must be present with them. These strict rules prove the authority of the importation and transportation of the goods.
3. Provide the vehicle driver with eAD
You will need to print the eAD (electronic administrative document) and give it to the vehicle’s driver transporting the good across the nation.
4. Consignee Duties
When the goods are finally checked into the excise warehouse, when the consignee (receiver) receives the goods, he has to complete a few other formalities. He should confirm that he has received the goods. And to complete the confirmation with authority, he should submit a ‘report of receipt.’
Important Queries to Note:
What if your goods are dispatched on or before December 31, 2020, but received from January 1, 2021?
If your goods were dispatched during the transitional period, the rules could be slightly different for you. If the goods were sent with the proper excise scheme, you do not need to worry about paying a custom declaration in great Britain. The documents stating that the movement started before December 2020 are enough for you to prove that your goods are free of customs duties.
The import rules and regulations that shall apply to such goods will be based on the excise legislation applicable in the EU at that time. The border force will ask for evidence of the good dispatching date and time. Make sure you have the following documents to prove your point:
- The eAD (electronic administrative document) containing the Administrative Reference Code (ARC) that proves the authority of excise goods
- If the goods’ excise duty is already paid, then make sure you have the Simplified Accompanying Administrative Document (SAAD)
What if I do not have the evidence of the date and time of goods dispatch?
In such a situation, you have to pay the customs duty on the goods. The goods will be treated as if they are dispatched after January 1, 2021.
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