Beware new rules over exports to EU

As the UK is no longer bound by EU law and with the Brexit transition period having ended on December 31, there are a lot of changes businesses need to be aware of, particularly businesses that import and export goods and services.

The UK has left the customs union, and VAT on exported goods now works a little bit differently.

The UK no longer has to comply with the EU’S minimum VAT rate of 15%.

However, since the UK’S VAT rate is 20%, nothing is likely to change.

All movement of goods between the UK and EU count as imports and exports, meaning they are subject to import VAT.

Businesses will require an Economic Operator Registration Identification (EORI) number from both the UK and EU to move goods.

The UK has introduced a postponed VAT accounting import VAT deferral scheme, so importers don’t need to pay cash to UK customs.

However, many EU countries do not offer a similar scheme to UK businesses.

Goods imported to the UK valuing less than £15 are no longer exempt from import VAT.

But what does this mean for your business and what do you need to do to ensure that you don’t get caught out with all the new rules?

Outlined as follows are three practical steps you should take if you have not done so already.

Step one is to analyse your supply chain and map the transaction flows into and out of the UK.

This will provide an opportunity to focus on those flows, and determine or examine whether those flows can, and should be, adjusted.

Following that analysis of the supply chain, potential obligations can be identified prevented.

If goods are currently transported from a factory in, for example, China to the UK, and subsequently dispatched from the UK to the EU, it may be prudent to transport the goods directly to an EU country such as the Netherlands instead.

Step two is to speak to your logistics partners.

Goods can move freely within the EU.

There are no customs obligations and goods can be transported across borders without being stopped for administrative reasons.

This is referred to as the principle of free movement of goods.

In relation to non-eu countries, this principle does not apply and it is clear that without this principle it is much harder to move goods around, with more declarations required.

Ensure that the logistics or even partners you have contracted are equipped for the additional tasks.

Step three is to check your contracts.

Check all contracts relating to transactions to and from the UK and check the conditions that were agreed upon, specifically who picks up taxes and duties as well as reporting.

This applies both for contracts with your customers as well as with your suppliers.

Using the right International Commercial Terms (‘Incoterms’) can, for example, prevent additional obligations arising for both parties.

We also recommend that you consider the existing VAT and customs obligations of the parties, in order to benefit fully from existing arrangements.

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