With the end of the transition period fast approaching, any business that trades with the EU should familiarise themselves with the changes which are due to be implemented from 1st January 2021.
The UK left the European Union as of 31st January 2020. However, the impact of this withdrawal on businesses was delayed until the end of the transition period, 31st December 2020. While within the transition period, the UK is still in effect a member of the single market and customs union and, as such, normal rules apply.
Trading with the EU from 1st January 2021
UK businesses should consider two main aspects of trading with EU post-1st January 2021.
Firstly, irrespective of whether the UK and the EU agree a Free Trade Agreement there will be significant changes to how businesses both import and export goods between the UK and EU Member States. Specifically, with regards to imports, a temporary easement period will apply which, dependant on the relevant goods, allows how businesses can choose to customs clear goods. This easement lasts until 30th June 2021 for most goods.
Secondly, UK businesses should also clarify their duty position should a Free Trade Agreement not be agreed.
Brexit - Tips for Importers
On the end of the transition period and the UK leaving the Customs Union, there will be many things for importers to consider that they may not have had to take into account before.
UK businesses receiving goods from EU countries will be required to complete import declarations but conversely there will be the requirement for export declarations to be submitted for the export from the EU.
Businesses should consider their supply chain with their suppliers, including who will be the importer of record and who will make these declarations, i.e. clearance agent, bureau, or the business itself?
If the business intends to complete the declarations itself there may be grant funding available for the training of staff and the upgrading of IT systems to enable a business to complete the required documentation.
If a business fails to complete the necessary declarations at the correct time and in the correct way there could be both financial and practical implications that would negatively affect business operations.
As such, advice should be sought at the earliest opportunity so businesses can ensure as smooth a transition as possible to minimise disruption and keep goods moving.
Brexit - Tips for Exporters
As with importers, there will be a wealth of new considerations for UK-based exporters on the conclusion of the transition period.
One such consideration is that each export to an EU Member State will require an importer in the country of ultimate destination. There are several options, although each option should be weighed for their implications.
It is possible for the EU customer themselves to act as the importer although this will require them to arrange customs clearance and potentially pay the duty which may act as a barrier to trade.
Alternatively, there are circumstances by which the EU customer could act as the importer of record but the UK exporter meets the duty and clearance costs, removing this potential barrier although the EU customer is still legally responsible for the declaration.
The most desirable option for EU customers would be for the UK exporter to act as the importer themselves, although this would require the UK business to obtain EU VAT registration and comply with EU legislation in relation to clearance.
MOSS and digital services
The VAT mini one stop shop (MOSS) allows businesses that sell digital services to consumers in EU member states to report and pay VAT via a single return and payment. To continue to use the system, after the transition period ends, UK businesses will need to register in an EU member state.
Visit Gov.uk to get your personalised list of actions
Your business, family, and personal circumstances will be affected post transition. To get your personalised list of actions, simply visit the Government website and answer a few questions. You can also sign up for emails to receive further updates.
If you have any further questions, please do get in touch with the team at DRG Chartered Accountants to discuss the financial aspects of Brexit on your business.
For further information
Gov.uk website: The UK transition – time is running out
Gov.uk website: Prepare to import goods from the EU to Great Britain from 1st January 2021
Gov.uk website: Prepare to export goods from Great Britain to the EU from 1st January 2021
Gov.uk website: Apply for grants if your business completes customs declarations
Gov.uk website: The eCommerce Directive after the transition period
ICAEW website: How to prepare for Brexit - checklist
DISCLAIMER: This information is for guidance only, and professional advice should be obtained before acting on any information contained herein. We will not accept any responsibility for loss to any person as a result of action taken or refrained from in consequence of the contents of this publication.
