Brexit
Following a national referendum in 2016, the UK left the EU on 31st January 2020. Some UK customs procedures for importing from the EU are still in a transition phase but most trade is now conducted on similar terms as trade with other countries. However, the UK and the EU have agreed a Trade and Co-operation Agreement (TCA), which allows certain goods to be traded between the countries without tariffs or quantitative restrictions.
Northern Ireland
Special arrangements have been agreed between the UK and the EU for the island of Ireland and there are no border controls in place between Northern Ireland and Eire. Northern Ireland (NI) is in the UK customs territory but has remained aligned with EU trade regulations. This means that there are special arrangements for moving goods from GB into NI as a declaration must be made and, if the goods are subject to a higher EU tariff than the UK tariff, they will have to pay this additional duty unless they can evidence that the goods are not at risk of moving into Eire (e.g. they are imported for consumption or processing in NI).
Duty Rates on Imported Goods
The UK has a Global Tariff which no longer contains any duty rates below 2%. These tariffs apply to imports from all countries except where preferential tariffs are agreed as part of a Free Trade Agreement.
Imports require a 10 digit tariff code and an 8 digit code is used for exports. The UK codes are still aligned to the EU commodity codes.
Free Trade Agreements
The UK has entered into new free trade agreements, the most significant one being the EU-UK TCA. Under a free trade agreement, goods that originate in one party can enter the other, at preferential (often zero) tariffs. The details of when and how a product is deemed to originate in a country is contained within the agreement. Provided a UK importer is certain that his goods originate in the EU (he may wish the supplier to issue a declaration of origin), he can import them without duty being payable – similarly, an EU importer may require a UK exporter to provide a declaration that the goods originate in the UK to enable him to import the goods into the EU without payment of duty.
The UK has also signed Continuity Agreements with many countries with whom it previously benefitted from a free trade agreement as a member of the EU. These continuity agreements allow the provisions of the EU free trade agreements to continue to apply to trade with the UK; at some stage, they will be replaced by new free trade agreements, like the Comprehensive Economic Partnership Agreement (CEPA) with Japan. The UK is also negotiating agreements with additional countries such as Australia and New Zealand.
Import and Export Declarations
The UK has introduced a new Customs Declaration Service (CDS) which must be used for all imports. Even traders that use a customs agent to complete import declarations on their behalf must sign up to CDS through the UK Government portal.
Export declarations are still made through the customs declaration system known as CHIEF. But this will change in 2023.
VAT on Imports
The UK has a system of Postponed Import VAT Accounting (PIVA), whereby registered VAT traders can simply account for import VAT in their periodic returns rather than actually paying the tax at import. It applies to imports from all countries.
There is no pre-approval system for PIVA but traders must register on the HMRC CDS system to obtain their PIVA statements each month.
To recover import VAT paid, the goods must belong to the importer, and evidence of VAT paid or postponed must be held.
Low value consignment relief no longer applies and all goods are subject to import VAT, whatever their value.
Deferment of Import Duty
Many importers may have a duty deferment account (DDA) with HMRC without the requirement for it to be supported by a financial guarantee. Provided a business is solvent and has no serious non-compliance issues, it may apply to have DDA of up to £10,000 a month without a guarantee. Traders that require a larger monthly deferment account limit will still need a financial guarantee unless they are an Approved Economic Operator or can evidence to HMRC that they meet AEO standards.