Local firms should brace for added red tape and extra costs

The revised Northern Ireland Protocol which formed part of Boris Johnson’s renegotiated withdrawal agreement has not been without controversy.

Chief among the concerns of those opposed to the current deal is the fact that it allows for a customs border between NI and Great Britain. This is to provide NI with a unique status, described as part of the UK customs territory but still applying EU customs rules, and negate the requirement for a hard border on the island of Ireland.

Clearly, that poses many political questions, but what is becoming increasingly apparent is the additional administrative burden that will be placed on local firms and especially those that rely heavily on trade within the UK. The customs border, which will effectively be down the Irish Sea, means that goods coming into NI from Britain will potentially be subject to EU tariffs unless, under rules yet to be agreed, the goods are deemed not to be at risk of crossing the border into the EU.

It will be possible to seek a rebate on these tariffs under the current proposals (subject to state aid rules) — provided the goods are to remain in NI. However, firms trading goods will also have to make customs declarations, both when goods move from Britain to Northern Ireland and vice versa.

UK Government papers released earlier this week outline the plans and have resulted in a strong reaction from industry, which envisages a huge increase in red tape and bureaucracy as a result.

The impact assessment stated: “Goods moving from Great Britain to Northern Ireland will be required to complete both import declarations and entry summary (ENS) declarations because the UK will be applying the EU’s customs code in Northern Ireland. This will result in additional administrative costs to businesses.”

Brexit Secretary Stephen Barclay, meanwhile, told a Commons committee that “exit summary declarations will be required in terms of Northern Ireland to Great Britain”.

Estimates have put the average cost of a customs declaration under these arrangements at up to £56, in some circumstances, per transaction — so there could evidently be a significant financial burden placed on the firms involved.

The impact assessment noted that 56% of NI’s external trade in goods is with GB compared to 16% with the Republic, meaning that the volume of NI trade subject to customs declarations under the latest proposals could exceed that under a no-deal Brexit.

All this, of course, relies on the deal being agreed by a majority of MPs at Westminster and approved by the European Parliament, so it is far from being set in stone.

The EU may still agree to an extension while a no-deal Brexit, although now appearing less likely, is still a possibility. Our advice to businesses remains that this is the scenario they should plan for above all others.

Lee Squires is director, indirect tax, at Grant Thornton