© Crown copyright 2018
This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open-government-licence/version/3 or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: email@example.com.
Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned.
This publication is available at https://www.gov.uk/government/publications/partnership-pack-preparing-for-a-no-deal-eu-exit/traders-importing-from-the-eu-only-what-to-expect-on-day-one-of-a-no-deal-scenario
The trade that you carry out with the EU will broadly follow the customs controls that apply for the rest of the world – you will need to adapt your business to comply with these new systems, processes and controls.
How the import process will change
If the UK leaves the EU, with a ‘no deal’ scenario, you will be subject to customs controls in the same way that businesses currently do when importing goods from a country outside the EU. This means that you will need to make an import declaration for goods entering the UK from the EU.
Customs checks may be carried out and you will need to pay any customs duties required under a new UK Trade Tariff, to replace the EU Common Customs Tariff (CCT) (see ‘Customs, excise and VAT changes’ for more information about establishing a new UK Trade Tariff).
Before importing goods from the EU, you will need to do the following:
- register for a UK Economic Operator Registration and Identification (EORI) number. You don’t need to do anything now. There will be further information available later in the year – if you sign up for EU Email updates (see ‘Things you can do now’ below), you will be contacted when this becomes available
- ensure your contracts and International Terms and Conditions of Service (INCOTERMS) show that you are now an importer
- consider how you will submit import declarations. It’s up to you whether you choose to submit the import declaration yourself or do it through a customs broker, freight forwarder or logistics provider – if you choose to do it yourself, you’ll need the right software and the necessary authorisations from HMRC, both of which will come at a cost
- decide the correct classification and value of your goods and enter the correct commodity code on the customs declaration. This will require knowledge of the item being classified, as well as its constituent parts: what it’s made of, where it originates from and the purpose for which it will be used. The commodity codes will be listed, along with the rate of import duty applicable, in a new UK Trade Tariff, which will replace the UK’s use of the EU CCT. HMRC already publishes tariff information and guidance for UK traders with third countries.
The UK Trade Tariff will replace the UK’s use of the EU CCT. The UK does not intend to immediately change any commodity codes, but the rules will be set out in new UK regulations rather than EU ones. The tariff will contain rules for determining the amount of import duty applicable based on the commodity code and country of origin, and will set out import procedures such as how the value of a good is calculated, and which forms, codes, and procedures you should use.
When importing goods from the EU, you’ll need to:
- have a valid EORI number
- make sure that your carrier, which can be a haulage company or a ferry or train operator, depending on the type of traffic, submitted a safety and security declaration at the appropriate time
- submit an import declaration to HMRC using their software, or get your customs broker, freight forwarder or logistics provider to do this for you
- pay VAT and import duties, including excise duty on excise goods, unless the goods are entered into duty suspension (for example, a customs or excise warehouse). If you’re using a warehouse, a financial security will be required to cover the duty liability of the goods while they are being moved to the warehouse. Import VAT may also be due (see ‘Dealing with import VAT’ below)
You may also need to apply for an import licence or provide supporting documentation to import specific types of goods into the UK, or to meet the conditions of the relevant customs import procedure.
Find out more about importing and licensing requirements.
How the excise process will change
Once excise goods leave a customs suspensive arrangement, they may be immediately entered into an excise duty suspension regime, so you will need to declare the goods on the Excise Movement and Control System (EMCS) for onward movement in the UK via a registered consignor.
For more information about this read Public Notice 197.
Dealing with import VAT
If the UK leaves the EU without an agreement, the government will introduce postponed accounting for import VAT on goods brought into the UK. This means that, if you’re a UK VAT-registered business importing goods to the UK, you will be able to account for import VAT on your VAT return, rather than paying import VAT when the goods arrive at the UK border. This will apply to imports from the EU and non-EU countries.
To reach this decision, the government took account of the views of businesses and sought to mitigate any adverse cash-flow impacts and ensure that VAT processes are kept as close as possible to what they are now.
To ensure equity of treatment, in a ‘no deal’ scenario, you will be able to account for your import VAT from non-EU countries in the same way. This will help you make the most of trading opportunities around the world.
We will issue more guidance setting out further detail on accounting and record keeping requirements soon.
VAT on parcels sent by overseas businesses
If the UK leaves the EU without an agreement, VAT will be payable on goods entering the UK as parcels, sent by overseas businesses.
Low Value Consignment Relief (LVCR) will no longer apply to any parcels arriving in the UK. This will align the UK with the global direction of travel on LVCR.
This means that all goods entering the UK as parcels, sent by overseas businesses, will be liable for VAT unless they are already relieved from VAT under domestic rules (for example zero-rated children’s clothing).
For parcels valued up to and including £135, which are non-excise goods, a technology-based solution will allow VAT to be collected from the overseas business that’s selling the goods in the UK. Overseas businesses will charge VAT at the point of purchase and will be expected to register with an HMRC digital service and account for VAT due.
The digital service is an online registration, accounting, and payments service for overseas businesses. On registration, businesses will be provided with a Unique Identifier which will accompany the parcels they send in to the UK. They will then declare the VAT due on those parcels and pay this via their online account.
This ensures the process of paying VAT on parcels does not become burdensome for UK consumers and businesses.
To give overseas businesses enough time to familiarise themselves with their new obligations, the online service will be available for businesses to register in early 2019, prior to 29 March.
On goods worth more than £135 sent as parcels, VAT will continue to be collected from UK recipients in line with current procedures for parcels from non-EU countries. VAT will also continue to be collected in line with current procedures for all excise goods sent as parcels and potentially in cases where their supplier is not compliant with HMRC’s new parcels policy.
HMRC is working with the relevant industry stakeholders and will provide further information soon.
VAT on vehicles imported to the UK
If the UK leaves the EU without an agreement, you should continue to notify HMRC about vehicles brought into the UK from abroad, using the online Notification of Vehicle Arrival Procedures (NOVA) system, to ensure that VAT is correctly paid.
The rules on the movement of goods to the UK from the EU will change when the UK leaves the EU and, as a result, import VAT will be due on vehicles you bring into the UK from EU countries. Certain reliefs will also be available as with current imports of vehicles from non-EU countries.
The Driver Vehicle Licensing Agency (DVLA) will not register a vehicle brought into the UK for use on UK roads unless it has a valid NOVA notification or it has been registered using the DVLA secure registration scheme.
Changes to VAT IT systems
If the UK leaves the EU without an agreement, the UK will stop being part of EU-wide VAT IT systems such as the Mini One Stop Shop (MOSS).
UK VAT Mini One Stop Shop
MOSS is an online service that allows EU businesses that sell digital services to consumers in other EU countries to report and pay VAT via a single return and payment in their home country. Non-EU businesses can also use the system by registering in an EU country.
In a ‘no deal’ scenario, you will no longer be able to use the UK’s MOSS portal to report and pay VAT on sales of digital services to consumers in the EU.
If you want to continue to use the MOSS system, you will need to register for the VAT MOSS non-union scheme in an EU country. This can only be done after the date the UK leaves the EU.
The non-union MOSS scheme requires you to register by the 10th of the month following a sale, so you will need to register by 10 April 2019 if you make a sale from the 29 to 31 March 2019, and by 10 May 2019 if you make a sale in April 2019.
Alternatively, you can register in each EU country where sales are made. There is more information on the EU Commission’s website.
EU VAT Refund System
You will no longer have access to the EU VAT Refund System but you can continue to claim refunds of VAT from EU countries by using the existing processes for non-EU businesses.
This process varies across the EU and you will need to make yourself aware of the processes in the individual countries where you incur costs and want to claim a refund.
There is more information about claiming VAT refunds from EU countries on the EU Commission’s website.
EU VAT Registration Number Validation
This service allows businesses to check whether a customer or supplier’s VAT number is valid. You will still be able to use the EU VAT number validation service to check the validity of EU business VAT registration numbers.
UK VAT registration numbers will no longer be part of this service. In the event of ‘no deal’, HMRC is developing a system so that UK VAT numbers can continue to be validated. We know this is important for certain businesses to carry out due diligence.
Northern Irish businesses importing from Ireland
The UK government is clear that in a ‘no deal’ scenario we must respect our unique relationship with Ireland, with whom we share a land border and are co-signatories of the Belfast Agreement.
The UK government has consistently placed upholding the Agreement and its successors at the heart of our approach. We recognise the basis it has provided for the deep economic and social cooperation on the island of Ireland.
It is the responsibility of the UK government to continue preparations for the full range of potential outcomes, including ‘no deal’. In such a scenario, the UK would stand ready to engage constructively to meet our commitments and act in the best interests of the people of Northern Ireland, recognising the very significant challenges that the lack of a UK-EU legal agreement would pose in this unique and highly sensitive context. This would include engagement on arrangements for land border trade. We will provide more information in due course.
The Irish Government has indicated it would need to discuss arrangements in the event of ‘no deal’ with the European Commission and EU countries. We would recommend that, if you trade across the land border, you should consider whether you will need advice from the Irish government about preparations you need to make.
Exhaustion of intellectual property rights
Intellectual property rights give the business, organisation or individual that holds the rights (the right holder) certain exclusive entitlements, which include the right to control distribution of a protected product. The exhaustion of intellectual property (IP) rights refers to the loss of the right to control distribution and resale of that product after it has been placed on the market within a specified territory by, or with the permission of, the right holder.
The UK is currently part of a regional European Economic Area (EEA) exhaustion scheme, meaning that IP rights are considered exhausted once they have been put on the market anywhere in the EEA with the rights holder’s permission.
In a ‘no deal’ scenario, the UK will continue to recognise the EEA regional exhaustion regime from exit day to provide continuity in the immediate term for businesses and consumers.
This approach means there will be no change to the rules affecting imports of goods into the UK, and businesses that undertake this activity may continue unaffected.
Ongoing UK recognition of the EEA regional exhaustion area will ensure that parallel imports of goods, such as pharmaceuticals, can continue from the EEA. A parallel import is a non-counterfeit product which is imported into a country where the intellectual property rights in that product have already been exhausted.
The implication for UK businesses is that intellectual property-protected goods placed on the EEA market by, or with the consent of, the right holder after the UK has exited the EU will continue to be considered exhausted in the UK.
This means that parallel imports of these goods from the EEA to the UK will be able to continue unaffected.
The government is currently considering all options for how the exhaustion regime should operate after this temporary period, and is undertaking a research programme to support this decision. The government will be working closely with business representatives, trade associations and other stakeholders on the implications of our plans.
The Intellectual Property Office has also published a factsheet on intellectual property rights and EU exit.
Trading under the mutual recognition principle
Some manufactured goods, such as furniture, textiles, bicycles, and cooking utensils are subject to national regulations rather than EU-wide rules.
These non-harmonised goods can circulate on the EU market under the mutual recognition principle, which prevents EU countries from prohibiting the sale of goods that have already been legally sold in another EU country.
This applies even where countries have different national requirements covering the same good. As an example, a bicycle made to comply with French national requirements and sold in France can then lawfully be marketed in other EU countries – even though those countries may have different national requirements for bicycles.
The only exceptions to the mutual recognition principle are restrictions which EU countries can introduce on grounds such as public safety, public policy and public morality.
EU countries’ right to restrict the circulation of these goods, for the above reasons, is regulated by the EU Mutual Recognition Regulation (764/2008). As well as setting out rules and procedures, it establishes product contact points in each EU country which respond to requests for information about national regulations.
How processes will change
In the event of a ‘no deal’ scenario, the UK would no longer fall within the scope of the mutual recognition principle. This means that if you import non-harmonised goods into the UK you will need to ensure they meet UK national requirements, even if your goods were previously lawfully marketed in another EU country.
Similarly, non-UK businesses exporting non-harmonised goods to the UK will need to ensure that the goods meet UK national requirements, regardless of whether they were previously lawfully marketed in another EU country or in the UK.
Trading goods regulated under the ‘New Approach’
EU legislation sets out the rules, or ‘essential safety requirements’, which certain products must meet before they are placed on the EU market.
If you trade in goods covered by these specific EU directives and regulations, you can read more guidance in the section Customs, excise, VAT and regulatory changes you need to know about if there is no deal in this pack and read the technical notice on Trading goods regulated under the ‘New Approach’ if there’s no Brexit deal.
Things you can do now
If you expect to be importing from the EU after 29 March 2019, you should consider now the effect of a ‘no deal’ exit on your business:
- read the government’s existing guidance for importing outside of the EU, to familiarise yourself with the key processes. On GOV.UK, search for ‘Starting to import’ and then select ‘Importing from non-EU countries’
- stay up-to-date with these changes by registering for email alerts. Follow the link, add your email address, select ‘Submit’, select ‘Add subscription’ and choose ‘EU Exit’ then select ‘Submit’
- take account of the volume of your trade with the EU and any potential supply chain impacts
- consider the impact on your role in supply chains with EU partners. If the UK and the EU do not have a Free Trade Agreement in place in a ‘no deal’ scenario, trade with the EU will be on non-preferential, World Trade Organisation terms. This means that Most Favoured Nation tariffs and non-preferential rules of origin will apply to consignments between the UK and EU.
- if necessary, put steps in place to renegotiate commercial terms to reflect any changes in customs and excise procedures, and any new tariffs that may apply to UK-EU trade
- consider how you will submit customs declarations for EU trade, if required, including whether to engage a customs broker, freight forwarder or logistics provider or whether to get the right software and authorisations to do it yourself
- if you deal with intellectual property-protected goods, you may wish to seek legal advice on how a ‘no deal’ scenario could affect your business model or intellectual property rights.
- if you trade under the mutual recognition principle, check that the goods you import to the UK meet relevant UK national regulations. This list may not be exhaustive
- the passport rules for travel to most countries in Europe will change if the UK leaves the EU on 29 March 2019 without a deal. Read the government’s guidance on Travelling to the EU with a UK passport if there’s no Brexit deal and, if relevant, ensure your employees and customers are aware of the potential changes
- we would recommend that, if you trade across the land border, you should consider any advice issued by the Irish Government about preparations you need to make, in addition to the guidance set out by the UK government.
- consider whether you could use customs procedures to delay or relieve the payment of customs duty until your goods are ready to be released into free circulation. A customs broker, freight forwarder or logistics provider can advise in the event of a ‘no deal’ scenario whether one of these procedures would be suitable for your business. These procedures include:
- customs warehousing: allows you to store goods without paying duty or import VAT. When the goods leave the warehouse, you must pay the duty, unless the business is re-exporting, or moving goods to another customs procedure. The warehouse must be authorised by HMRC
- inward processing: allows you to import goods from non-EU countries for work or modification in the EU. When this has been completed, you must pay any customs duty and VAT due, unless goods are re-exported or moved to another customs procedure, or released to free circulation
- temporary admission: allows you to temporarily import and/or export goods such as samples, professional equipment or items for auction, exhibition or demonstration into the UK or EU. As long as the goods are not modified or altered while they are within the EU, you will not have to pay duty or import VAT
- authorised use: allows a reduced or zero rate of customs duty on some goods when used for specific purposes and within a set time period
For excise duty purposes, goods are not regarded as imported if they are immediately placed under one of these customs procedures. You will need to pay excise duty when these goods are eventually released from these procedures into free circulation, unless they are immediately placed into excise duty suspension.