Unless all member states agree to an extension, the UK leaves the EU on 30 March 2019. The UK intends to leave the EU Customs Union, meaning the re-introduction of a UK-EU Customs border. A negotiated outcome of a Free Trade Agreement (FTA) with no customs duties imposed is still the most likely scenario. However, the prospect of no deal, or a very limited deal between the UK and the EU, is a real political possibility, resulting in the UK falling back on World Trade Organisation (WTO) rules in 2019; a “hard” Brexit.
Currently, as part of the EC, we are part of a single trading community and goods produced in the Community can move freely and seamlessly throughout all member states.
In addition to the VAT return, a business submits EC Sales Lists to show the sales that it has made to each of its VAT registered customers in other member states. It may also be required, dependant on thresholds, to submit Intrastat Supplementary Statistical Declarations, advising the value of goods that it has despatched to or acquired from other EC member states . There are no border controls or documentary checks to delay shipments.
Although we don’t have a crystal ball, post-Brexit there is likely to be a transitional period, after which the UK will be treated in the same way as any other non-EC country with export and import declarations replacing the current statistical declarations. Also, there may be additional documentation and licencing requirements to meet security regulations and health and safety standards that are checked at the border.
Goods arriving at the border can be subject to anything from document checks, to inspection, to actual testing of samples at the border, which may lead to delays. As a result, businesses may need to build in additional delivery time to alleviate the effect of these controls. It is useful to note here that businesses are also charged for checks. A physical examination of goods from port health authorities can cost a trader anywhere between £106 and £600 per container.
Sales to EC member states can still be zero rated (albeit as exports) provided evidence that the goods have left the country within three months is retained. A corresponding import entry will be required when the goods enter the EC, on which import duty and VAT will be due.
Similarly, when goods are received from the EC an import declaration will be required, with VAT due at the time of clearance unless the deferment is authorised. This could cause cash flow difficulties.
The change in documentation may lead to increased costs as the data requirements for Customs are more extensive than for Intrastat, and there may be a need to upgrade current software and train staff in its use. If you use an agent for Customs declarations it can cost around £20 per entry.
With uncertainty over the UK’s post-Brexit cross-border regime and the length of any transitional period, this leaves businesses in a catch-22 situation. Waiting until the end of the negotiation period may not leave much time to implement new systems before rules and trading arrangements change; on the other hand, until it is clear what the new regime will be it is difficult to know what changes to make.