updated 14 October 2021
Following a national referendum in 2016, the UK left the EU on 31st January 2020. Throughout the rest of 2020, the UK was in a transition period and there were no changes in processes or procedures for trade between the UK and EU. That ended at 11pm on 31st December 2020 at which point the UK left the EU customs union and single market; trade between the UK and EU 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.
Following a public consultation, the UK issued its own Global Tariff. Compared to the EU tariff under which goods were previously imported, duty rates have been eliminated on some goods and others have been simplified by rounding down tariff to whole numbers, e.g. the duty on toys is now 4% rather than 4.7%. These tariffs apply to imports from all countries, including the EU, except where zero 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.
Imports will still require a 10 digit tariff code and an 8 digit code will be used for exports.
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.
Customs declarations are now needed to import from and export to the EU and HMRC has increased the capacity of its CHIEF system to handle all the additional work.
To assist traffic flow between the UK and EU during the first six months of 2021, and to prevent goods having to stop on the way into the UK while a customs declaration is made, the UK has introduced a system of deferred import declarations. This system is not available for certain “controlled” goods (such as alcohol, fish or fireworks) and it is not compulsory, i.e. importers may still make customs declarations when goods arrive. But traders who wish to make use of this system need to keep a record of the arrival of the goods and arrange for an import declaration to be made to HMRC within 175 days of arrival. As duty is only due once the import declaration is made, importers who use this system can delay the payment of import duty. Traders do not have to be pre-authorised by HMRC to make deferred declarations and they may choose to defer some but not all of their import declarations.
For all imports from 1st January 2022, import declarations will be required when or before the goods arrive in the UK from the EU. This will be using the current practice for placing goods into temporary storage upon arrival while they clear customs or declaring them into UK customs before they leave the EU or moving then under the Transit procedure for customs clearance at an inland location. The process will depend on the carrier and the port of entry.
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).
The UK has introduced a system of Postponed Import VAT Accounting (PIVA) for goods over £135, 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.
Traders that make use of the deferred import declaration procedure for EU imports in January to June 2021 will need to estimate and account for the import VAT in their next return following the date of the arrival of the goods. Once the import declaration is submitted and the actual VAT due is determined, any difference will need to be amended in their following VAT return.
However, import VAT must be paid (and can be reclaimed if the importer is VAT registered and is the owner of the goods) on small consignments of £135 or less.
Legislation has been introduced which will enable many importers to 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.