Are You Ready For Brexit? VAT And Customs Duty Considerations

9 November 2020 –

At the time of writing there are a little over 50 days until the end of the Brexit transitional period, and the UK’s exit from the EU is complete. This doesn’t leave much time for businesses to prepare, particularly as the UK’s trade negotiations with the EU are still ongoing. This article reflects the areas of recent and upcoming focus for many of my clients as they take steps to minimize the risk of disruption to their supply chains after 1 January 2021.

Current Position

It’s worth remembering that one of the European Union pillars is an ability for goods to move freely within the trading bloc. By being in the EU Customs Union, businesses can move goods between the Member States without worrying about import taxes, although they still need to consider the VAT rules of each of the 27 Member States and may need to account for this tax on their sales.

This situation means that the flow of goods around the Customs Union is relatively frictionless in administration and timeliness.

What’s Changing?

Once the Brexit transition period ends, the UK will be outside of the Customs Union. Goods leaving the UK destined for the EU will become exports from the UK and imports into the EU. The same will apply to goods moving from the EU to the UK; they will be imported into the UK.

Every time goods cross the Customs border, import taxes (import VAT and Customs Duty) need to be paid. Customs declarations are also required as part of the process of bringing the goods into the destination country.

Actions Businesses Can Take

Businesses are increasingly focusing on preparing for the end of the Brexit withdrawal period and are rightly concerned about making sure that their products do not become stranded after 1 January 2021.

Six basic actions can minimize the chances of this happening to your products:

1. Declarations Will Be Required Deal or No Deal

This is one of the myths of the current UK/EU trade negotiation. Whatever the outcome, it’s expected that it will be necessary to submit import and export declarations. This will be the case even if a tariff-free deal is agreed – that outcome would only result in import duties not applying to relevant goods. Gaining assistance from an intermediary such as a customs agent is recommended. Put simply, ‘how’ will a business file an import declaration come 1 January 2021 and at ‘what’ cost?

2. Obtain EORI numbers

Economic operator registration identification (EORI) numbers will be needed to make imports and exports. At the moment, an EORI can be used to facilitate transactions across the EU. From 1 January 2021, it will be necessary to have separate UK and EU EORI numbers.

3. Map The Legal And Physical Supply Chains

Understanding or reconfirming legal and physical supply chains will help to pinpoint where changes will occur. These changes could be additional costs (e.g., the payment of customs duty), additional administration (e.g. needing to file a customs declaration), or additional tax administration (e.g., having to VAT register in another country). It will be necessary to make sure that the right documentation is in place to manage that and decide whether the supplier or customer will act as the importer.

4. Duty And VAT Payments

Deferment accounts for duty may be beneficial for those importing regularly. From 1 January 2021, it will be possible to account for import VAT on a UK VAT return, which might bring cash flow benefits. Consider how best to manage these costs and the actions taken to implement them.

5. Confirm Commodity Codes

Every declaration for an import and export will need to include the commodity code of each item involved. It is this code that will determine the rate of duty that applies. There are more than 15,000 codes, and if the business does not currently know which applies to its products, it should find out.

6.The EU Perspective

Understanding the EU position is the ‘other side of the coin’ when UK businesses buy from or sell to the EU. The EU position requires the same management as the UK to ensure that supply chains operate as intended.


To sum up

The UK government’s message is that the transitional period will not be extended despite the impact of COVID-19 and the current economic environment. This means businesses should prepare for the UK’s new trading arrangements. Working through the six points above is a good start to help companies to minimize the possibility of disruption to their supply chains. The amount of change arising from the UK’s exit from the EU will differ from business to business, so reviewing your supply chain to identify the ‘pinch points’ is a critical first step in getting Brexit ready.–vat-and-customs-duty-considerations

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