Policy paper

The Customs (Modification and Amendment) (EU Exit) Regulations 2020

Published 24 December 2020

1. Who is likely to be affected

Businesses that:

• import goods to the United Kingdom (UK), or who move certain goods between Great Britain (GB) and Northern Ireland (NI);
• use a duty deferment account;
• export goods for repair or modification.

2. General description of the measure

This measure introduces a number of legislative changes that will allow customs procedures to operate appropriately at the end of the transition period. This includes:

• Measures providing for how goods located in NI are to be treated when the separation provisions of the UK’s EU Withdrawal Agreement cease to apply.
• Customs duty relief arrangements for duty chargeable in NI, or where goods return to the UK after repair or modification in another country with which the UK has a trade agreement.
• Enabling overseas businesses to obtain approval for duty deferment on the provision of a guarantee from a UK financial institution or provider.

3. Policy objective

These provisions will allow customs processes and legislation to operate fairly and effectively from the end of the transition period.

4. Background to the measure

The measure includes provisions setting out how various customs arrangements will apply in relation to NI following Royal Assent to the Taxation (Post-transition Period) Act 2020 (TPTPA). It also includes changes in response to recent HMRC stakeholder engagement, and changes designed to address business readiness for the end of the transition period.

In the command paper ‘The UK’s approach to the Northern Ireland Protocol’ (published 20 May 2020) the government set out its intention to make full use of provisions in the Northern Ireland Protocol allowing it to waive and/or reimburse tariff on goods moving from GB to NI . This instrument provides for relief arrangements that will enable the waiver or reimbursement of this tariff where appropriate.

Other changes in this instrument have not previously been announced, although HMRC regularly discuss the customs rules that will apply in the UK after the end of the transition period, and a range of proposals for change, with businesses, other bodies and representative groups.

5. Detailed proposal

5.1 Operative date

The provision in relation to deferment of duty liability will come into effect the day after the instrument is laid. Most of the remaining changes are designed to take effect at the end of the transition period, although some aspects of the relief arrangements in NI will become available from a later date. For operational reasons it is only possible to commence the relief arrangements for duty charged on domestic UK goods that are moved to NI from GB where the declarant’s goods are “at risk”, and where a relief claim is made in the customs declaration as an application for a waiver of the duty on the 31st December. HMRC will commence provisions later in 2021 relating to claiming a relief on duty for goods incurring “at risk” duties when entering NI from countries outside the EU and the UK, or where duty has been paid and repayment may be possible under “de minimis” rules. Guidance associated with the implementation of the NI Protocol will clarify which reliefs are available when.

5.2 Current law

The Taxation (Cross-border Trade) Act 2018 (TCTA) establishes the framework for a UK customs duty regime to be in place at the end of the transition period. This will operate alongside existing UK customs legislation, such as the Customs and Excise Management Act 1979 (CEMA). Regulations made under TCTA include:

• The Customs (Import Duty) (EU Exit) Regulations 2018 (SI 2018/1248), which include rules concerning deferment of duty liability.
• The Customs Tariff (Establishment) (EU Exit) Regulations 2020 (SI 2020/1430), which introduces the document ‘Tariff of the United Kingdom’.
• The Customs (Transitional) (EU Exit) Regulations 2020 (SI 2020/1449), which sets out the UK’s customs rules that apply for goods subject to the separation provisions in the UK’s EU Withdrawal Agreement.

5.3 Proposed revisions

The instrument amends the Customs (Transitional) (EU Exit) Regulations 2020 (SI 2020/1449) to include provision for how goods located in NI are to be treated when separation provisions set out in the UK’s EU Withdrawal Agreement cease to apply to those goods. Once these separation provisions cease to apply, the goods will generally be subject to the same customs rules as other goods that have been moved to NI.

The instrument also introduces duty relief arrangements that will apply in NI. This will enable an eligible person, subject to the de minimis state aid rules that will apply in NI and other conditions, to claim duty relief when they make a declaration of goods in NI, or to claim a repayment of duty previously paid. The provisions include rules concerning eligibility for reliefs, how a claim is to be made, the granting of claims by HMRC and cases in which a claim which was not due has been paid by HMRC.

Changes are made to the Customs (Import Duty) (EU Exit) Regulations 2018 (SI 2018/1248) that extend the opportunity to defer duty liability to overseas persons provided their duty liability is secured by a guarantee from a guarantor who is established in the UK.

The instrument also makes amendments to the outward processing procedure set out in the Customs (Special Procedures and Outward Processing) (EU Exit) Regulations 2018 (SI 2018/1249) so that goods declared for an outward processing procedure in the UK can benefit from full duty relief when they return to the UK after a repair or modification if such relief is provided for in a trade agreement.  Minor changes are made to ensure references to ‘vehicles’ in the Customs and Excise Management Act 1979 also include ships and aircraft. It also makes provision to clarify how the ‘Tariff of the United Kingdom’ document will apply alongside EU customs legislation that will continue to have effect in NI, for cases in which the UK tariff is used to calculate the duty chargeable in NI.

Summary of impacts

Exchequer impact (£m)

2020 to 2021	2021 to 2022	2022 to 2023	2023 to 2024	2024 to 2025	2025 to 2026

Once the UK transitions to its new relationship with the EU, costings, where required, will be subject to scrutiny by the Office for Budget Responsibility and included in their forecasts at a future fiscal event.

Economic impact

This measure is not expected to have any significant macroeconomic impacts.

Impact on individuals, households and families The measure does not introduce any requirement for individuals beyond what has already been agreed in or is a necessary consequence of the Northern Ireland Protocol. There is not expected to be any impact on family formation, stability or breakdown.

Equalities impacts

It is not anticipated that there will be any impacts on groups with protected characteristics.

Impact on business including civil society organisations

This measure is not expected to have any additional impact on businesses, including civil society organisations, as the amendments either support the implementation of the Protocol, which is already part of UK law, or ensure that existing facilitations such as duty deferment and outward processing relief continue to be accessible and operate as intended should businesses choose to apply for them.

Operational impact (£m) (HMRC or other)

There will be no operational impact as a result of this measure as it contains provisions to support the customs provisions that were inserted into the TCTA by the TPTPA. It does not introduce any new requirement beyond what has already been agreed in the Protocol or is a necessary consequence of what has been agreed.

Other impacts

Other impacts have been considered and none have been identified.

6. Monitoring and evaluation

The measure will be kept under review through communication and ongoing stakeholder engagement with trade bodies and other representative businesses.

7. Further advice

If you have any questions about this change, please contact Neil Vosper in the Customs Legislation team by email neil.vosper@hmrc.gov.uk

8. Declaration

The Rt Hon Jesse Norman MP, Financial Secretary to the Treasury, has read this tax information and impact note and is satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impacts of the measure.