Businesses importing goods into the UK after 1 January 2021 will have several factors to consider.
The processes for importing goods into the UK from EU countries is very different to that in place in 2020 and before.
If businesses are not aware of the processes then their goods could be delayed in entering the UK, or in the worst cases will incur demurrage charges (effectively a penalty rent that ports charge when goods are not cleared into the UK in good time).
Here’s an overview of the rules in respect of general imports. There are different rules for the importation of parcels valued at £135 and in respect of bringing goods into Northern Ireland.
1: Are you importing goods?
Businesses which have previously imported goods into the UK from countries outside the EU will be familiar with most of the points set out below. However, these businesses will still need to be aware of the introduction of Postponed VAT Accounting (See point 9 below).
Businesses which buy goods from EU suppliers will need to look at their trade terms to determine whether they will be considered to be importing those goods into the UK (i.e. whether they own the goods at the point that the goods cross into the UK).
2: Ensure that your business has an EORI Number
An Economic Operator Registration and Identification (“EORI”) Number with a GB prefix will be required in order that businesses can make Import Declarations.
HMRC started the process of auto-enrolling some UK businesses with EORI numbers. However, this process will not have captured new businesses or businesses which had not previously traded with the EU (or perhaps those that have incorrectly completed their VAT returns in respect of EU purchases).
On this basis, it would be prudent for a business intending to bring goods into the UK from 1 January 2021 to check whether it has an EORI number and obtain one if it does not.
This can currently be done by entering the business’s VAT number with a GB prefix and three 0’s (e.g GBXXXXXXXXX000) into the following webpage click here. If a business needs an EORI number it can be obtained from the following webpage click here.
3: Classify your goods
Importers are required to determine the commodity code that applies to their goods. Commodity codes can be found from HMRC’s Tariff. click here.
The Tariff is usually the first step for businesses in determining the duty rate applicable to goods, whether import VAT will be due and whether the goods are ‘controlled’ goods or not.
The commodity code will also determine which rules apply in determining whether the good can be said to have an Origin in the EU.
4: Check the rules for your goods
A business should check whether there are any special specific labelling or health and safety rules in respect of their types of goods.
The goods could be deemed controlled goods and require an Import License.
If you are placing manufactured goods onto the market, then additional rules may apply. For the rules covering goods placed on the market in Great Britain <click here> and for goods placed on the market in Northern Ireland <click here>.
There are also detailed rules covering specialised goods which are discussed in “The Border Operating Model” <click here>.
5: Decide whether you will complete your own customs declarations
When goods enter the UK, Import Declarations will need to be made.
A business can decide to complete its own Import Declarations.
HMRC provide further guidance for businesses which choose to do this click here.
If a business does choose to complete its own import and export declarations then it may benefit from a grant to enable it to train staff and improve its IT to do this click here.
Specialist software will be required to enable businesses to make their own declarations. HMRC are currently in the process of updating their own systems and therefore software will probably need to be updated more than once.
6: Decide whether someone else will make your customs declarations
Many businesses will use a freight forwarder to transport the goods they bring into the UK.
Freight forwarders will often also provide the service of completing the relevant Customs Declarations.
If a business’s freight forwarder does not complete Import Declarations, then it may be that Customs Agents can be hired to provide this service.
The following link provides information in respect of Freight Forwarders and Customs Agents. click here.
7: Duty, Origin and Duty Deferment
Dependant on the classification of their goods (see 3 above) Duty may be due on the goods businesses bring into the UK.
Excise Duty could also be payable in addition to any Customs Duty. click here.
It may be possible that a reduced rate of Duty is available if the goods originate from a country with which there is a preference agreement. Businesses should therefore check whether a preferential agreement applies to the goods being imported click here.
In theory the deal that the UK Government agreed with the EU means that there should be no duty payable in respect of goods which have an Origin in the EU. However, the rules as to whether goods can be said to have such an Origin are complex and it may be that a Customs Consultant will be required to advise.
Businesses which import significant amounts of goods into the UK on which Duty is due may find it beneficial to delay the point that duty is paid by setting up a Duty Deferment Account click here.
A Duty Deferment account traditionally requires a guarantee from a bank but businesses are now able to apply for a waiver of the guarantee up to 100% of the duty deferred. click here
8: Speeding up the import clearance procedure
Businesses may be able to delay making their full import declaration for 6 months.
To take advantage of this procedure the goods must have been in free circulation in the EU between 1 January 2021 and 30 June 2021 and must not be Controlled Goods.
The business will also require a good compliance history.
The business or its Customs Agent/Freight Forwarder may also need a Duty Deferment Account.
9: Postponed VAT accounting
If a business provides its VAT number and EORI number in respect of its Import Declaration and has not brought the goods into the UK under the simplified declaration procedure before 1 January 2021 then it will receive an Online Monthly Statement from HMRC.
Instead of paying Import VAT when the goods enter the UK, the business will need to account for VAT by charging itself VAT on its VAT return (as set out on the Online Monthly Statement) click here.
If the goods are for use in its taxable business or to be sold as a taxable sale in the UK, then the business will also be able to recover the VAT charged on its VAT return click here.
10: Seek advice in respect of complex EU supply chains
For the majority of businesses planning to import goods the advice they will require may be best obtained from either a Freight Forwarder or a Customs Agent who will have the day to day knowledge of the manner in which declarations can be made and the customs procedures which can be employed.
However, more in-depth VAT advice may be required where supply chains are more complex.