|The Giftware Association is proud to bring you the latest news on Bexit, as much as we know of it and how it will affect our members. As there have been a couple of changes to the government over the last few weeks and new deals now on the table. Our customs expert Barbara Scott, from Customs Associates has very kindly provided us a piece on a no deal Brexit and to be prepared for any outcome.
With time running out for the UK and the EU to decide on the basis of a new arrangement for trade in goods when the UK leaves the EU on 29th March next year, businesses should be considering what the consequences may be should there be “no deal”. Of course, we are hoping for a transition period, during which everything remains as it is today for trade both within and out with the EU, but the European Commission wishes that to end before 2021.
Currently, goods traded between the UK and EU are not subject to any import duty and, for supplies to VAT registered businesses, import VAT charges. In the worst case scenario, ie with no deal, when you sell goods customers in the EU, they would have to pay import duties at the same rates that currently apply to non-EU imports. Also, the goods would require an export declaration to leave the UK and an import declaration to enter the EU – this would be additional cost for your customer who may also, depending on the type of goods and the applicable rules within the EU member state of arrival, need to pay import VAT. Similarly, for goods received into the UK from the EU, you would have to pay import charges which, initially at least, would be the same rates as those applied to goods imported from non-EU countries today.
Of course, this is not a position that either the UK Government or the EU wants, particularly because of the Irish land boundary where border controls would be unacceptable. So, what is likely?
Everything is still open for negotiation for “Day 1”, be that next March or the beginning of 2021. It is now recognised that a “soft border” between the UK and EU facilitated by technology is not going to be available in the required timescales. The Government White Paper published last week proposes that there should be a free trade arrangement resulting in little change and certainly no customs clearances on goods moving between the UK and EU. But, if EU or UK duty rates change (for example if the UK no longer applied high tariffs on Chinese ceramic kitchenware) there would be a complex system for dealing with imports into the UK which are destined for both the UK and EU markets; there would be the option for businesses that are authorised by HMRC as trusted traders to pay the higher rate of duty on the goods but then claim a repayment of the duty on the goods that are placed on the UK market. The White Paper proposes that the mechanics for obtaining the repayment should be simple but clearly there would need to be robust audit processes for ensuring the correct duties are paid.
However, we need not get too excited about the detail just yet as the proposal has to get past the UK and EU politicians first! In the meantime, we are told that HMRC is preparing for no deal as, just in case it should happen, they want to minimise disruption as much as they are able. The European Commission has also issued a paper this week urging the customs authorities and businesses in the EU27 countries to make preparations for the worst outcome in March next year. GA members must consider this too, especially those that have only traded within the EU before. HMRC has promised that, as soon as it can, it will publicise what business needs to do – it’s just that, unless our politicians get a move on, there may not be much time for business to carry out those preparations.