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New Year, New Borders

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In this blog post we examine what changes to expect in 2021 with the upcoming UK border with the European Union and the importing and exporting of goods

As the vast majority of us are well aware, the transition period with the EU and the UK will end on 1st January, 2021. From this date, the UK will operate a full external border meaning controls will be placed on the movement of goods between Great Britain (the UK excluding Northern Ireland) and the EU. While the Northern Ireland Protocol means trade in goods between Northern Ireland and Ireland, and between Northern Ireland and EU member states, will continue unaffected, this definitely won’t be the case for moving good between Great Britain and the EU.

In light of this, what are the key points for businesses to consider and what are the deadlines involved?

From 1 January 2021

Customs Declarations (Exports & Imports)

Importers and exporters will have to complete UK and EU customs declarations. Some locations will require pre-lodgement of customs declarations before the movement of goods.

Customs Duties (Imports)

Importers will need to pay any customs duties applicable under the new UK Global Tariff, with importers having to determine the origin, classification and customs value of their goods.

VAT (Imports)

VAT will be levied on imports of goods from the EU, following the same rates and structures as are applied to Rest of World (RoW) imports. VAT registered importers will be able to use postponed VAT accounting, but unless eligible to defer their supplementary declarations, won’t have to. Non-VAT registered importers have the same options available to report and pay import VAT as they do for customs duties.

Safety & Security Declarations (Exports & Imports)

To ensure HMRC know who’s coming in and how often, what they are bringing in, and why, the UK Government will collect more information on goods moving into GB from the EU, including Safety & Security declarations.

Additional Requirements for specific goods

Certain goods will have to follow some additional rules, such as the need for special certifications, entering the country via specific locations, and undergoing additional checks at the border. This depends on the goods in question:

  • Goods covered by International Conventions / Commitments – 1 January 2021
  • Goods subject to Sanitary and Phytosanitary controls – 1 January 2021 – 1 April 2021 – 1 July 2021 (introduced in three stages)
  • Goods with Additional Customs Requirements – 1 January 2021
  • Other goods including Strategic Exports – 1 January 2021

Postponed VAT Accounting (PVA) – 1 January 2021

UK VAT-registered traders will be able to account for the import VAT on goods imported into the UK from EU and non-Eu countries on their VAT returns, paying and recovering import VAT on the same VAT return. Import VAT will be accounted for on the VAT Return and not handled/paid separately at the point the goods are imported into the UK.

PVA will: goods imported from anywhere in the world who currently pay import VAT at (or soon after crossing) the UK border.

  • Allow VAT registered traders to account for import VAT on their VAT return for
  • Maintain the current cash flow position for goods imported from the EU
  • Provide a cash flow benefit for traders importing goods from non-EU countries

In most cases, traders can choose whether or not to use PVA, and when to start using PVA, opting to use it for some declarations, but not others, while in other cases it’s mandatory. Non-VAT registered traders cannot use PVA and continue to pay their import VAT as they do now.

Northern Ireland

Under the Northern Ireland Protocol, how the VAT Return for traders located in NI is affected from 1 January 2021 is different to the rest of the UK.

HMRC Online Statement

Traders will be able to access a downloadable online monthly Postponed Import VAT statement to be included in their VAT return, which will show the amount of import VAT
postponed for the previous month. Like the current (C79) import VAT certificate, this will provide the evidence needed to support deduction of import VAT as input tax on the VAT return.

Depending upon the frequency of the trader’s VAT Return and upon which month the statement applies to, it is likely that sometimes the trader will already have completed and submitted the VAT Return before they have received the statement detailing the true import VAT values for the preceding month.

Even with PVA, there will potentially be times a trader is unable to access their online statement before having completed and submitted the VAT Return for the associated VAT period for which the online statement applies to. Where this is likely to happen, the trader must use estimated values on the VAT Return for the likely import VAT-related values applicable to the month for which the online statement is not going to be received in time. The trader will then need to adjust the next VAT period to make good any discrepancy between the estimated import VAT values and those detailed in the online statement.

For more information on how Pegasus can help your business manage the forthcoming changes, complete our enquiry form and someone will get in touch.

Posted On: December 16, 2020