The Basics

From 1st Jan 2021 all imports to the EU will be treated in the same way as imports outside of the EU have been under current arrangements.

There are some important basics in these arrangements.

• The buyer is usually responsible for clearing goods through customs and paying taxes. Importers therefore are responsible for paying taxes on imports.

• Imports are subject to Customs Duty and Import VAT.

• Import VAT is usually 20% recoverable for VAT registered businesses.

• Customs Duty is not recoverable and the rate depends on the commodity.

• Local VAT will now be applied to imports from the EU raising the prices of imports.

It is worth noting that for many importers, a Shipping Agent, such as DHL or Fedex will be handling most of the administration. If you import through a Shipping Agent, it is worth starting with your account manager there to see how your imports will be handled.

Importing Responsibilities

Whether or not your business is VAT registered you will need to identify yourself as an importer to HMRC with an EORI number.

If you are currently importing from the EU you will need an EORI number to continue doing so from 1st Jan 2021.

• You can check if you already have one here.

• VAT Registered businesses can apply for one here.

• Non-VAT Registered businesses can apply for one here.

Larger importers will employ an Customs Agent to handle the import paperwork of importing to the UK, for smaller importers this usually taken care of by a Shipping Agent. Whoever does the admin you will need to identify the correct Customs Commodity Code of your import.

Duty and Import VAT is usually paid via the Shipping Agent. Usually HMRC will require this payment before releasing goods from Customs but to mitigate disruption a transition period of 6 months has been agreed where HMRC will release goods first and Duty and Import VAT can be settled within six months.

Reclaiming Import VAT

Customs Duty is not reclaimable but most Import VAT will be reclaimed by VAT registered businesses via their VAT returns. Currently this Import VAT must be paid before goods are released from Customs and can only be reclaimed after the business has been sent paperwork to prove the VAT payment called a C79.

From 1st January, we move to a system of ‘Postponed Accounting’ for Import VAT. Businesses will need to include their EORI number starting with ‘GB’ on their customs declarations. If this condition is met, they will be able to account for Import VAT on their VAT returns without having a C79.

For most importers this will result in a ‘Net Zero’ effect of Import VAT.

At a later date HMRC will issue the Import VAT record - C79. These records must be gathered and reconciled against Import VAT reclaimed in later returns.

Reclaiming EU VAT

Up to now, UK firms incurring VAT in EU countries can reclaim VAT back. This arrangement comes to an end on 1st Jan and VAT incurred in 2020 must be reclaimed by 31st March 2021.

Customs Duty

As previously stated Customs Duty is not recoverable. At time of writing we do not have clarity on what Duties will be applied to EU Imports.

In the worst case scenario of no-deal, Global Tariffs will apply. It is worth considering threats to business from the potential tariffs which can be checked here.

Controls

Customs declarations will be needed for controlled goods such as alcohol and tobacco from 1st January 2021. Pre-notification and health documentation will be required on all products of animal origin from 1st April and full controls will be applied to all good from 1st July.

Deferred Duty

Regular Importers may apply for a Duty Deferment Account that will delay paying most customs duties and Import VAT. With this account in place payments will be made monthly via Direct Debit rather than with each individual consignment.

Imports worth less than £135

There is no Customs Duty on goods worth less than £135.

And again during a six month transition period Customs Duty can be settled after goods leave Customs within a period of six months.