No Deal

Paying customs taxes on your imports from the EU in a no-deal scenario

Customs Duty

Word is that in a no-deal Brexit, WTO customs duty rates will apply to imports from the EU.  Disaster?  Not entirely.  Many products are what are known as ‘full rate free’ for Customs duty purposes.  This means that although they are technically liable to Customs duty, the full rate of duty is zero.  There are in point of fact quite a lot of products falling in to this category.  To find out the Customs duty rate on your imports, please visit: trade-tariff.service.gov.uk/trade-tariff/sections

You will need to drill into this site based on the precise description of your goods.  Once you have established the correct 10 digit ‘commodity code’ appropriate to the goods you intend to import, you will note a column titled ‘Third country duty’.  If this shows 0% it means there duty rate on your import is zero – happy days.  You will also be able to see the VAT rate for your goods here.

Of course, many products have a ‘positive’ duty rate.  These vary and are usually based on the value (although some may be based on quantity, particularly in the agricultural sector] or a combination of both). 

Generally speaking, few products have a WTO rate exceeding 12% of the value.  Post a no-deal Brexit, the value is the arrival of UK frontier value.  That is the purchase price plus all incidental costs as far as the UK frontier.  Many WTO rates are considerably less than 12%.

But it is all extra costs, I hear you cry.  Loss of competitiveness or loss of margin, or both.

Yes.  However, a number of factors come in to play:

  • For goods under temporary admission, being re-exported, being processed before return or repaired and so on, Customs duty will be suspended under certain conditions or refundable at re-export

Anti-Dumping Duty

Some products are liable to an additional import duty, called ‘anti-dumping duty’.  Think of this as a protectionist surcharge and you have more or less got it.

The good news, post no-deal Brexit, it’s only the UK’s own manufacturers that will be protected by a similar UK stand-alone scheme.  This means some products will be cheaper to import than previously, even under full WT Customs duty rates.

What, an advantage from a no-deal Brexit?  Whatever next?

Customs and anti-dumping duties will have to be paid at the frontier, unless a relief applies or the goods are destined for an approved ‘Customs Warehouse’.  You know – what everyone in the real world calls a ‘bond’.

Excise Duty

This one was never relieved, even in the so-called ‘Single Market’.  Excise has always been a national tax and differed in each EU member state.  As a result, there has always been Customs Clearance on excise products.  EU propaganda just required it to be called something different in a vain attempt to disguise its real nature.  Post-Brexit?  No difference.

Excise duty will have to be paid at the frontier, unless the goods are destined for an approved ‘Excise Warehouse’. 

VAT

No deal advice issued by the UK government has stated that something called ‘Postponed VAT accounting’ will apply.  This will be for all imports, whether EU origin or otherwise.  Although a frontier declaration to Customs will be required, no VAT will change hands on arrival of import cargo at the UK frontier.  Instead VAT will be paid via the importer’s quarterly VAT return.

Hold on.  That’s another no-deal Brexit advantage, isn’t it?  If you import from outside the EU block, you will no longer have to front the VAT on your imports.  Bargain.  That’s two gains in one blog and they said a no-deal was the ‘worst case scenario’.  Who’d have thunk it?

VAT for ‘private’ importers [that is those without a VAT registration] will presumably have to be paid via the import frontier Customs entry.  This has implications.  EU ‘distance sellers’ will probably need to register in the UK and find it very unattractive to sell direct to the consumer [‘B to C’].  Might level a few playing fields.  Certainly, our friends at Customs will love this as they see international ‘B to C’ as full of fraud, although I have never been sure where their evidence is for this.

OK, I owe tax – how do I pay it to HM Revenue and Customs?

There are various methods to give Customs their due.  The simplest for all is something called ‘Duty Deferment’.  Think of it a special bank account guaranteeing a certain limit of funds to our friendly officers in any given month.

How do you get your own deferment account?  See: gov.uk/government/publications/notice-101-deferring-duty-vat-and-other-charges

Read it?  That’s nice and simple, then.  Note that to get deferment authorisation, you must have a special guarantee called a ‘Customs Comprehensive Guarantee’.  To do this, you need a financial institution acceptable to HMR&C which is prepared to give you a guarantee and they charge.  Oh yes, do they charge.

Our recommendation?  Speak to your Customs specialist broker or freight forwarder.  They may make arrangements for you to access their own duty deferment account, subject to status and conditions.  Yes, they will also charge.  But I bet it proves more cost effective.

David

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