New UK importing rules: Establishing a UK Presence

A recent Enterprise Ireland webinar outlined the key rules around customs that will come into effect when the Brexit transition period ends and discussed issues around establishing a UK presence. 

 

On 1 January 2021, the free movement of goods between the UK and Member States of the EU ends and the UK will become a ‘third country’.

Margaret Whitby, Head of Stakeholder Engagement at BPDG and Claire Wilson, Stakeholder Engagement at HMRC Customs and Borders Unit gave an overview of how the import/export rules will change.

“If you currently move goods to or from GB or EU, you only need an invoice and a transport order. After the end of the transition period the process will start with an export declaration and when you arrive at the ports in Great Britain you’ll need to have import declarations. So you will have up to nine additional procedures to take into account, depending on your role in the supply chain. These rules will come into play no matter what agreement is reached,” explained Whitby.

 

Staged introduction

Recognising the impact of coronavirus on businesses’ ability to prepare, the UK Government has decided to introduce the new border controls in three stages up until 1 July 2021 for UK imports.

“Most traders will not have to make import customs declarations on 1 January 2021 but those importing controlled goods (such as excise goods) will be expected to follow full customs requirements,” said Whitby. ​

“The requirement for safety and security declarations on import – Entry summary Declarations (ENS) will also be waived for six months.”

On 1 January 2021 the UK will join the Common Transit Convention (CTC) in its own right which allows duty to be suspended when moving goods across CTC member countries. EU goods arriving in the UK under transit will need to complete Office of Transit formalities.

“We intend to use a digital model to automate this process, making early use of the Goods Movement Vehicle System, which will support the Pre-Lodgement model for both imports and exports from July 2021,” said Wilson.

On 1 April 2021 the UK will phase in additional import documentation for animal products and on 1 July 21 it will implement full customs requirements and border checks.

 

General requirements and preparation

A UK importer and exporter will need to have an Economic Operators Registration and Identification (EORI) number (goods not services) issued by the UK and EU importers and exporters must have an EORI number issued by an EU Member State.

“You also need to agree terms and conditions with your UK importer and ensure that responsibility for customs checks, duties, verification and release regimes is clear,” said Whitby.

If there is no free trade agreement the UK Global Tariff will be in place from 1 January 2021. The tariffs will be calculated using the commodity code and must be paid when the supplementary declaration is submitted.

 

Declaration requirements from January 2021 to July 2021

Claire Wilson gave details about declaration requirements for imports and exports.

“Traders bringing goods from the EU to the UK will need to declare their goods to customs. Goods must be declared in advance of crossing if moving through a listed Ro-Ro port or a location without existing systems.

“Traders moving non-controlled goods to the UK will be allowed to declare their goods by making an entry into their own records. They will be required to submit this information via a supplementary declaration within six months of import and pay the duty via an approved duty deferment account at that point,” explained Wilson.

Traders moving controlled goods will need to make a frontier declaration. If the goods are coming in through a location without systems that would allow the trader to notify HMRC that goods have been imported, the trader must manually arrive the declaration in HMRC systems (including entry to the Excise Movement and Control System for excise duty suspended goods) by the end of the working day following the physical crossing.

The UK is moving to full customs control for exports from 1 January so traders exporting goods from the UK into the EU will need to submit export declarations and safety and security information.

If goods are moving via a non-inventory linked location the customs declaration will need to be submitted as “arrived” while the goods are at the trader’s premises. HMRC will notify the trader if the goods have “permission to progress” or need to be taken to a facility for a check.​ If goods are moving through a location with existing inventory systems the standard Rest of World export model will be followed.

From 1 July everything moves to Rest of World procedures.

“We’re working now with border locations to develop how they will manage goods moving through. Some will use the temporary storage model, or the newly developed Pre-lodgement model, some will use the new IT system called the Goods Vehicle Movement Service to support the Pre-lodgement model for both imports and exports and to facilitate Transit movements,” said Wilson.

 

VAT and Excise

The UK Government announced that from 1 January 2021 postponed VAT accounting will be available to UK VAT registered businesses (including Non Established Taxable Persons) for imports of goods from all countries.

On 1 January 2021, the Rest of World rules will apply to imports and exports of excise goods moving between the UK and the EU.  Businesses will need to complete customs import and export declarations using the relevant codes for duty paid or suspended goods. If businesses move duty suspended excise goods to and from a tax warehouse to the place they enter and exit the UK they must use the UK version of Excise Movement and Control System (UK EMCS). UK EMCS must also be used to move duty suspended excise goods from UK warehouse to UK warehouse.

 

Setting up a UK entity

In the second half of the webinar Gerry Collins, Managing Partner, and Ruth Potter, Tax Partner, at Ecovis, a company which is highly experienced in working with businesses internationally, spoke about creating a UK presence.

 

Importing into the UK as a non-UK business

“Goods moving from the EU into the UK will be regarded as imports and will be subject to import VAT,” explained Potter.

“Where the UK customer is unwilling to be the importer of record, the Irish supplier will be responsible and may have to register for UK VAT. A non-UK business can register as a Non-Established Taxable Persons Unit with HMRC; they don’t need a UK physical presence. But they will require a UK EORI number.”

Businesses will need to be established in the UK in order to act as a declarant for customs declarations. If the business doesn’t want to have a presence it will have to appoint a UK-based customs intermediary to deal with customs documentation. Alternatively a non-UK trader without a UK establishment can appoint a full UK agent who will act as the principal and take full responsibility for necessary customs entries, reporting and payment.

 

Creating a UK presence

“You may want to establish a UK presence simply to act as the customs agent for the Irish business. This would involve minimum cost. Or you might want a presence that can receive goods into the UK for onward supply to your customers, enter into commercial contracts with UK customers and employ staff,” said Potter.

She also explained that non-UK businesses can set up UK bank accounts, but added that the anti money laundering policies can be cumbersome and fees may be higher. Some banks insist on a UK legal entity and HMRC will not issue direct VAT repayments to businesses overseas.

Gerry Collins then outlined the issues involved in setting up a legal entity in the UK looking at the options of a UK branch, a separate limited company or a partnership, in terms of time to set up, legal protection, accounting filing, taxation and commercial issues.

“Setting up a separate entity sends a very strong message of market intent and so is good if you’re thinking of expanding. In my 30+ years of experience about 95% of businesses wanting to do this set up a limited company, normally a 100% owned subsidiary. The 5% who set up a partnership are generally in the financial services sector.”

To conclude, Ecovis outlined some key actions that businesses should be taking now given the short timescale to the end of the transition period. These include talking to customs intermediaries, checking likely commodity codes and VAT rates in the UK, appointing a VAT agent to deal with VAT compliance and performing a Brexit risk assessment.

Ecovis has offered Enterprise Ireland clients a free one-hour consultation for specific company enquiries.