British businesses doing business in Europe must now finalise their preparations for the final phase of Brexit at the same time as managing the wide-ranging effects of the coronavirus pandemic. In light of the fact that the negotiations between Britain and Europe are still ongoing, planning for the worst-case scenario, with the built-in agility to vary, once there is clarity on the final exit terms, maybe a wise approach.
The transition period ends on 31 December 2020 almost one year after the UK separated from the EU. The new border operating system will begin on 1 January 2021. The Border and Protocol Delivery Group was unable to publish the new border operating model until 13 July 2020 which has revealed the significant expansion of customs declarations and the inevitable additional administration involved. Declaration volumes are likely to grow from the current 55 million to an anticipated 300 million in 2021 with a projected cost to businesses of £7 billion. The government's own admission in the operating model guidance frankly admitted "customs declarations are complicated."
The implications for organisations importing "standard" EU goods are that they will require new documentation for customs. It is imperative that meticulous records are maintained as specific records of imported goods will be required, however, there is an option to take up to six months before submitting a full customs declaration for incoming EU goods. The taxes required for EU imports can also be deferred for six months until July 2021provided the correct approvals have been sanctioned for either the business or your agent. With regard to controlled goods, full customs requirements will apply whether the goods are from the EU or elsewhere. VAT on imported goods will be able to be accounted for by means of the Postponed VAT Accounting from the beginning of 2021, meaning that at the end of the staged introduction period VAT due on imported goods can be delayed until the next VAT return is due. Vincenzo Senatore, a partner in Giambrone's corporate and commercial team, said "companies that trading across the world will have the option of taking advantage of the introduction of staged measures applying to EU imports, bringing the benefit of increased cashflow, whilst familiarising with the new border operating system or continuing with the existing process and access the newly introduced postponed VAT payments and ensure free deferment to potentially delay border taxes to up six months." Vincenzo further commented, "regardless of the option you choose, all businesses that import or export goods face an entirely different way of working, with a greater need to ensure legal compliance is implemented."
The new way of managing the import and export of EU goods at the borders will require a level of compliance that exceeds the existing system in order to avoid breaches. Those businesses who have only ever dealt with the EU and have never had to deal with customs procedures or physical checks at the border will need to get to grips with the new processes and many will turn to customs agents to deal with these new border processes on their behalf. The government provides a list of customs agents
There are a number of factors that conspired to make the last phase of the Brexit planning exercise infinitely more challenging. The unexpected arrival of the coronavirus pandemic being the most difficult; coupled with the spectre of a no-deal Brexit which has returned to haunt British businesses again and threatens to de-rail some small to medium enterprises (SMEs) who may have assumed that the government would be able to frustrate the potential for a no-deal Brexit and therefore did not factor in the prospect of such a consequence in their Brexit preparations. The well-established trading routes with the UK and Europe can be preserved by the collective determination of the commercial world.
Originally published August 3, 2020.
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