Policy paper

UK Transition: The Customs (Transitional Arrangements) (EU Exit) Regulations 2020

Published 9 October 2020

Who is likely to be affected

Businesses and intermediaries importing goods from the European Union (EU) into Great Britain (GB).

General description of the measure

This measure is a facilitation that will allow traders importing goods from the EU to make a declaration in their commercial records at the time of the import and delay providing a declaration to HMRC for up to 6 months. This will apply to standard goods (not controlled goods such as alcohol or tobacco) imported in the period 1 January 2021 to 30 June 2021.

The deferral of the declaration for these goods also defers any import duty payable until the declaration is made to HMRC. In addition, the measure excludes traders with a history of non-compliance from being able to defer declarations.

Policy objective

The amendment will assist businesses adversely impacted by coronavirus (COVID-19) by allowing them additional time to meet their customs obligations whilst making sure that effective border controls continue after the transition period.

Background to the measure

The government announced on 12 June 2020 that border controls for EU goods imported into GB will be introduced at the end of the transition period in stages to give businesses affected by coronavirus more time to prepare.

Detailed proposal

Operative date

Parts of the instrument that relate to authorisations for simplified procedures and persons eligible to use transitional arrangements will come into effect on 29 October 2020. The remaining provisions will be brought into force using appointed day regulations.

Current law

Legislation for the simplified customs declaration process is in Part 4, Chapter 3 of the Customs (Import Duty) (EU Exit) Regulations 2018. This allows authorised persons to use the simplified customs declaration process and make a simplified customs declaration at the border and then a supplementary declaration, containing the remainder of the required information by the 4th working day of the following month.

Proposed revisions

The instrument makes amendments to the Customs (Import Duty) (EU Exit) Regulations 2018 (the Import Duty Regulations) to allow businesses and intermediaries the ability to make a simplified customs declaration in their commercial records and defer the submission of a supplementary declaration to HMRC for up to 6 months (the ‘transitional Entry in Declarant’s Records (EIDR) simplified customs declaration process’) when declaring goods for the free circulation procedure. Minor amendments are also made to other Regulations in order to allow the operation of the transitional EIDR simplified customs declaration process.

Deferring the supplementary declaration also defers the payment of any import duties arising. Without this amendment the Import Duty Regulations would require a business to have a duty deferment account (DDA) in place before importing goods. The changes introduced through this instrument remove the requirement for such an account to be in place until the supplementary declaration is due. The transitional EIDR simplified customs declaration process will be available to all eligible businesses that import non-controlled goods in the period 1 January 2021 to 30 June 2021.

The process will not apply to controlled goods such as alcohol and tobacco and businesses importing these goods will need to submit full customs declarations or, if they are authorised, simplified customs declarations. A public notice will be published alongside the instrument setting out further detail on what HMRC regards as not ‘fit and proper’ for the purpose of excluding traders from the transitional EIDR simplified customs declaration process.

This instrument also amends the Import Duty Regulations to make sure that customs agents may only use the simplified customs declaration process and the EIDR procedure acting as a direct agent if the principal of the agent is established in the United Kingdom.

Summary of impacts

Exchequer impact (£million)

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 the final costings will be subject to scrutiny by the Office for Budget Responsibility and will be included in their forecasts at the next fiscal event.

Economic impact

This measure provides economic certainty to traders by staging the introduction of customs requirements. The staged approach will give industry extra time to make necessary arrangements and could minimise any delays at UK ports.

Impact on individuals, households and families

It is not anticipated that there will be an impact on individuals, households and families.

Impact on business including civil society organisations

Due to the scope and temporary nature of this measure, as well as the degree of change required, the impact on businesses and civil society organisations is expected to be negligible. This measure is a temporary, optional facilitation and some businesses that have the capability may prefer to move immediately to the declaration processes and timescales that will be in place for all goods from 1 July 2021. For businesses that are not ready to meet their customs obligations this will allow them to continue to trade while they make preparations to be fully compliant from 1 July onwards. Businesses that choose to use this facilitation will not need to provide a declaration to HMRC or have a DDA in place, but they will need to become authorised to use the simplified customs declaration process and have a DDA before they can submit their deferred supplementary declaration.

This is a matter of timing and should not materially affect the total number of declarations submitted to HMRC over 2021 or the overall ongoing administrative costs to businesses of submitting the declarations over the annual period. Businesses may incur negligible one-off costs which are likely to include familiarisation with the new rules, eligibility criteria, ongoing responsibility and about the record keeping requirements and data retention to make a supplementary declaration 6 months later.

This process is not mandatory, but it is expected to be most beneficial for those businesses that only import from the EU and therefore have little or no experience of customs processes, and could, therefore, help to ease delays at the border. Take-up among smaller businesses is expected to be higher than for medium or larger businesses, although the ability to defer payment of import duty and the requirement for a DDA may make the potential cash flow benefits equally attractive for them.

Operational impact (£million) (HMRC or other)

HMRC resource will be required to identify and exclude high risk traders from the transitional EIDR simplified customs declaration process, and resource will be required to enforce this exclusion. This will mostly take the form of staff resource.

There will be a significant resource requirement placed on HMRC in 2021 as unauthorised traders and agents who have used the facilitation or wish to represent those that have, apply for authorisations so that they can make the supplementary declaration. There will then be a subsequent requirement for HMRC to take compliance action to make sure that all supplementary declarations have been submitted and that those that have been are accurate.

Other impacts

Other impacts have been considered and none have been identified.

Monitoring and evaluation

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

More advice

If you have any questions about this change, contact Darryl Wall in the Declarations Policy team by email: darryl.wall@hmrc.gov.uk.

Declaration

The Right Honourable 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.