The end of the Brexit transition period – are you ready?

26 November 2020 - Elizabeth Nichols

Joy Shaw, Tax Manager, looks at some of the things businesses need to be doing now to get ready for the end of the Brexit transition period.

The UK’s final weeks before the completion of Brexit are fast approaching. Although Britain exited the EU earlier this year, some aspects of its relationship with the EU have remained during a transition period that is set to expire on 31 December.

When this transition period ends, it is important that all traders are prepared for the immediate changes to many parts of their operations. Although the UK and EU remain engaged in ongoing negotiations to create a new trade deal that would take effect after the transition period, there are some aspects of trading that will be unaffected by any such agreements. As such, it is important for UK trade organisations to be prepared for the upcoming changes.

Making Preparations
There are a number of steps that employers should take in order to be ready for the staged introduction of customs controls, such as:

  • Any organisation that is involved in supply chains should educate themselves on EU border requirements, procedures and access to EU or individual member state’s systems.
  • All businesses must apply for a Great Britain Economic Operators Registration and Identification (EORI) number. Applying for an EORI number takes approximately 10 minutes, and most employers will receive theirs within a week. VAT registered businesses with EU trade should have already been enrolled with a number and should check before applying.
  • Some British traders or hauliers—such as those conducting customers declarations or getting a customs decision in the EU—will need to apply for an EU EORI.
  • Customs intermediaries will become necessary for many businesses that conduct transactions outside of the EU. An intermediary will help businesses understand what is needed for various formalities and declarations. Without an intermediary, businesses will have to access Her Majesty’s Revenue and Customs (HMRC) and purchase software in order to handle their own declarations. UK traders may also require an EU intermediary in order to manage these steps in the EU.
  • UK businesses with regular imports should consider using a duty deferment account (DDA). This type of account allows for various customs charges to be consolidated into one monthly payment. To set up a DDA, traders should apply for a deferment account number. Authorisation by the HMRC will be required.
  • Specifically, VAT registered traders may have additional preparations that they must make. Businesses completing full customs declarations after the Brexit transition period that have chosen not to defer customs declaration will have the option of using postponed VAT accounting to account for import VAT via the VAT return.

It should be noted that VAT registered businesses importing non-controlled goods that are delaying supplementary customs declaration or using the simplified customs declaration process are required to account for their import VAT on the VAT return.

For imports that are part of transactions not exceeding a value of £135, the point within the transaction at which VAT is collected will be moved from the point of importation to the point of sale. As such, instead of import VAT, traders will be responsible for supply VAT.
For businesses that are not VAT registered, including VAT registered businesses that are not using postponed VAT accounting, there will be a requirement to report and pay import VAT through the customs processes. In these situations, VAT payments can be deferred using a DDA.

  • All employers should take the time to ensure that their employees are properly equipped for post-Brexit operations. This means that drivers must have proper documentation, such as international driving permits.
  • Certain responsibilities and requirements within commercial contracts and arrangements may change following the transition period. Employers should review Incoterms’ rules. These rules are regulated by the International Chamber of Commerce and must be understood by traders that are involved in international transactions.

More Information
As the Brexit transition period approaches its expiration date, the UK government is expected to provide further guidance on a number of subjects that should help businesses better understand how their operations may be altered starting in 2021.

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