If you own a UK company and need to trade to the EU, you could be going through some difficulties with the new rules since the Brexit transition ended. Even big companies such as John Lewis and Marks and Spencer are suspending certain services to the EU due to problems with customs and some EU customers have been hit with charges when buying from the UK. So here’s a guide that will tell you everything you need to know about how to go about importing and exporting goods in and out of the UK.
Customs
All businesses, regardless of the goods exported or the route chosen, will need to keep all their records for the next six years. They will also be required to do the following:
1. Obtain an EORI (Economic Operators Registration and Identification) number. This can take between 5 and 10 minutes to complete. Take a look at our guide The EORI number explained: What it is and why you need it to trade. Businesses trading by moving goods to or from Northern Ireland (but not through to the Republic of Ireland) will require a second EORI number. This will start with XI. (For more information see our section on trading with Northern Ireland below.) Then obtain your EORI number via the government website by clicking on the link Get an EORI number.
2. Check what import licences or certificates you may need depending on the goods exported such as food, livestock, products etc.
3. Decide whether you will be responsible for your own declarations or whether you will use a Customs Intermediary (CI) to complete the declarations for you. The business must provide the CI with the EORI number and other declaration details.
4. If you do decide to complete the declarations yourself then you will have to train a member of staff on how to complete the declarations and will probably need to purchase specialist software as well. The business will need to register to use the National Export System (NES). An export declaration must be completed before export, using NES which provides a unique reference number (URN). You will also need to apply for a CHIEF Badge. CHIEF stands for Customs Handling of Import and Export Freight and is the computerised entry processing system. This will be replaced with a new system, the Customs Declaration Service (CDS), within the next two years.
5. Exporting procedures - these depend on the various processes which are outlined below:
Standard Export procedures: the export declaration URN is required to allow the goods to cross the border. The business must make sure that the EU importer has done everything needed, including having an EU EORI, with the right licences and certificates and completing a correct import declaration.
Transit: this can be used when goods are moving across several territories or if the business wants to complete customs procedures away from the border. The business or the CI can apply for 'authorised consignor' status, which allows the goods to start movement (and move in to Transit) from an authorised location belonging to the CI or business and not the designated Office of Departure (OD).
If completing its own declarations, the business needs to register for the New Computerised Transit System (NCTS). A guarantee must be provided before the movement of goods can start which should be arranged with a bank or financial institution and must be authorised by HMRC. Before export, as well as an export declaration, a Transit declaration must be completed on NCTS. This provides another URN.
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The person moving the goods must have the Transit Accompanying Document (TAD), required in paper form throughout the journey, provided by the authorised consignor if being used. Alternatively, they must take the URN from NCTS to the OD in return for a TAD. With any new system, a plethora of acronyms such as the one in the previous sentence, will obviously abound. So making sure you know all the jargon is important if you are to communicate easily with government and customs officials.
Goods temporarily being moved out of the UK can avoid paying customs and tax if using 'temporary admissions' procedures; either ATA Carnets or the Duplicate List.
Another useful link is the government website Get Access to the Customs Declaration Service.
Invoicing
Specific origin wording should be shown on invoices. This is essential for your business because the origin statement (along with HS code information) determines the amount of duties and taxes you’ll have to pay for all your imports into the UK or exports to the EU.
Your invoice should clearly state:
- The origin of each product (please refer to the www.gov.uk website for detailed guidance on the rules of origin)
- A statement at the bottom of your invoice which reads:
The exporter of the products covered by this document (insert EORI No.) declares that, except where otherwise clearly indicated, these products are of (insert) preferential origin.
…………………………………............(Insert place and date)
…………………………………........... (Insert name of the exporter)
Where your invoice covers a mix of goods of UK, EU or other third country origins, the statement will apply only to the UK/EU origin goods. If your invoice contains no goods of UK or EU origin, the statement can be omitted.
It is the responsibility of your business to ensure invoices contain all necessary detail to ensure accurate and timely export and import declarations can be made and to avoid unnecessary duties and taxes to your business or your customers.
According to the latest information most logistics companies advise goods should be exported using only pallets certified to ISPM15 standards to avoid delays and repalletization costs so it might be good practice to speak with your preferred logistics company before embarking on the transport.
VAT
With Brexit, VAT procedures have changed considerably, so make sure your accountants are fully up to date with the new procedures.
Businesses that import goods would normally have to pay import VAT on arrival before those goods can be released from the port. However, HMRC has agreed that this import VAT can be paid as part of the normal quarterly VAT return under the Postponed VAT Accounting (PVA) system.
The importer doesn’t have to use PVA, but it helps with cash flow if they do. To receive statements from HMRC on the amount of import VAT that has been postponed, and which needs to be reported on the VAT return, the trader also needs to register for the Customs Declaration Service (CDS).
Goods leaving the UK for the EU were called 'removals' but will now be called 'exports'. If certain conditions are met, the export of goods can be zero-rated for VAT purposes but records must be kept in order to prove this. The conditions are:
- Official or commercial evidence (for example from a customs system or certificates of shipment) to prove the entitlement to zero-rating.
- The goods must be exported from the UK (and evidence obtained) within either three or six months depending on what types of goods are exported.
If the conditions are not met or there is not sufficient evidence then the supply will be treated as standard rated. Zero-rated supplies must still be accounted for even though there is no VAT liability. There will no longer be any requirement to adhere to distance selling regulations and there will no longer be a requirement to verify the VAT status of the recipient.
If you’re importing goods from the UK to the EU and delivering on duty paid (DDP) terms, then local EU VAT advice must be sought. (Click here for expert help and advice with VAT services). The EU have introduced the Import One Stop Shop (IOSS) for sales that cost less than 150 Euros. For more information you can go to the Europa website:
https://ec.europa.eu/taxation_customs/business/vat/modernising-vat-cross-border-ecommerce_en.
However, UK businesses supplying digital services to EU consumers can no longer use the Mini One Stop Shop; instead they will have to choose a member state to register for the non-EU version known as Non-union MOSS scheme and account for all their B2C EU sales via that system.
Please see the following link: https://www.gov.uk/guidance/the-vat-rules-if-you-supply-digital-services-to-private-consumers#vat-accounting-options-for-uk-businesses-supplying-digital-services-to-consumers-in-the-eu
B2B services/B2C services
B2B services have not been greatly impacted by Brexit. The place of supply for these types of services is still where the recipient belongs. There is no longer any need to submit EC Sales Lists, but the customers EC VAT number can still be shown on the invoice where it has already been obtained as it is good evidence of business status. The “reverse charge” wording on the invoice is no longer a requirement, but again it may be prudent to retain as it indicates the onus is on the customer to deal with the VAT accounting rather than the supplier.
https://www.gov.uk/guidance/vat-place-of-supply-of-services-notice-741a#sec12
A summary of all service changes can be found at the following link: https://www.gov.uk/government/publications/accounting-for-vat-on-goods-moving-between-great-britain-and-northern-ireland-from-1-january-2021/accounting-for-vat-on-services-between-the-uk-and-eu-member-states-from-1-january-2021
Sales to UK consumers via online marketplaces
The UK has introduced a £135 threshold for goods coming from overseas sold to UK consumers via a third party OMP (Organised Market Place – such as Amazon or eBay). Here the OMP is responsible for accounting for the UK VAT on the sale and there are no import implications for the supplier. If the goods are sold direct by the supplier to the consumer, the supplier will have to VAT register in the UK and account for VAT.
For consignments over £135 whether direct or via an OMP, businesses will have to check their terms to see who is the importer into the UK – themselves or their customer. Please see the following link to the government’s website for further guidance:
https://www.gov.uk/government/publications/changes-to-vat-treatment-of-overseas-goods-sold-to-customers-from-1-january-2021/changes-to-vat-treatment-of-overseas-goods-sold-to-customers-from-1-january-2021
Northern Ireland
A complication for UK businesses is that if they move goods into or out of Northern Ireland, they need to already have an EORI number that starts with GB, and then they will need to apply for a second EORI number that starts with XI. (That means there are two different EORI numbers, NOT the same number with the pre-fix changed.)
Where the trader is moving goods between Great Britain and Northern Ireland they should sign up for the Trader Support Service, which is designed to help businesses cope with the Customs and VAT border which now exists in the Irish Sea. You can find out more by clicking on the government website Sign Up for Trader Support Service.
VAT: Northern Ireland will continue to operate as part of the EU VAT area and the rules on exporting to the EU will not change. Northern Ireland is also part of the UK VAT system. VAT must be applied to supplies of goods as it is in the rest of the UK. If the supply of goods is moved through Northern Ireland to the EU, this will be a zero-rated supply as noted above.
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Customs: The Northern Ireland Protocol confirmed that sending goods from the UK to Northern Ireland will not be subject to tariffs, provided it remains in the UK's customs territory. If the goods are at risk of entering the EU then tariffs will be due. To prove that this is not the case, it will be necessary to be authorised for the UK Trader Scheme. Declarations will, however, be required:
- Deferred declarations: when importing standard goods (non-controlled items), the customs declaration and payable duties can be delayed by up to six months provided contemporaneous records are kept. A supplementary declaration is made upon import.
- Standard import procedures: a full customs declaration is completed upon import. Inputting of the commodity code and customs procedure code will give a Unique Reference Number. Duties can be paid immediately or deferred using a Duty Deferment Account.
- Simplified declaration procedure: if importing standard goods or some controlled goods this procedure can be used, but authorisation must be applied for. A simplified frontier declaration must be completed on CHIEF before importation. A supplementary declaration is required by the fourth working day of the month following import.
- Transit: can be used when goods are moving across multiple territories or if the business would like to complete customs procedures away from the border.
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The steps needed to comply with the transit system are as follows:
1. The EU exporter must submit the export declaration and a Transit declaration.
2. The goods must arrive via an Office of Transit (OT) in the UK. (The process at this point depends on the point of entry).
3. The goods then proceed to an Office of Destination (OD) to end the Transit movement. The business can apply to be an authorised consignee and temporary storage authorisation must be applied for at the same time plus access to the New Computerised Transit System.
4. If authorisation is obtained, the goods can go to the business' authorised location instead of an OD. Then the goods will exit Transit when moved to another Customs procedure. The options are Deferred Declarations (present EORI at OD) or Simplified Declaration/Standard Import (present Movement Reference Number from CHIEF at OD). NB: There may be further processes required, depending on the point of entry location.
5. As part of the import process, before the goods are moved cross-border, the business must ensure that the EU exporter ('declarant') has done everything required to enable the goods to pass through EU Customs. This will include obtaining an EU EORI number, having the correct licences and certificates and completing the correct export declarations.
6. Customs duties will be paid by monthly direct debit when using a Duty Deferment Account (required for Deferred Declarations and Simplified Declarations). Payment is immediate where completing a full Customs Declaration unless a Duty Deferment Account is applied for, along with Excise duty (unless goods placed into excise duty suspension).
If all this seems too much like hard work, then opening a branch of your business in a neighbouring EU country such as France or the Republic of Ireland may be the way round this complicated new system. Our free downloadable guides on how to open a company in both France and Ireland are available below. Or if you’d like to have a chat about how easy it is to open a company abroad where all the paperwork is done for you, including obtaining a registered address, opening a business bank account, or finding an accountant, just call our UK office on 0044 (0) 203 445 0916 or our English-speaking French team on 0033 (0) 1 53 57 49 10 or email us via our contact page.
