For ROI based businesses trading with GB, even with the Trade and Cooperation Agreement in place, you will still need to have processes in place to deal with Customs procedures and formalities and VAT rule changes.
We have set out below key actions relating to Customs & VAT required by businesses before 11pm on 31 December 2020.
1. Understand the potential impact on your supply chain
Ensure you have reviewed your supply chain to understand the potential impact of customs controls, any customs duties and VAT on the movement of your goods into, from or across GB.
Ensure hauliers and freight forwarders are prepared with the relevant permits and registrations.
2. EORI number
Importers and exporters of goods need to be customs registered. If not already registered, an application should be filed with Revenue via Revenue’s Online Service (ROS) for an EORI (Customs) number if you are trading goods between ROI and GB.
Even with the Trade and Cooperation Agreement in place without an EORI number you will not be able to continue to trade with GB and your shipment of goods will be delayed until you receive a number.
Assess whether the Incoterms in your contracts with your suppliers and customers meet your needs post 1 January 2021 and ensure you understand what they mean. Incoterms are internationally recognised trade terms that define each party’s obligations, costs and risks associated with the delivery of goods from seller to buyer. Critically, Incoterms define whether you or your customer/supplier is responsible for the filing of customs declarations and any associated payment of duties and VAT.
4. Filing Customs declarations
Make sure you are in a position to file or have someone file customer declarations for your goods movements and that you can access the information needed for the declarations.
Have you appointed a customs agent or will your freight company file declarations on your behalf? Depending on your profile, a longer-term solution may be to bring the declaration process “in-house”.
The rate of any Duty arising on goods depends on their Customs classification and origin. Ensure you have confirmed the commodity codes and origin for all goods moving into and out of GB and vice versa.
5. Trade and Cooperation Agreement provisions
The Trade and Cooperation Agreement reached between the UK and the EU provides for tariff free imports of “qualifying goods” traded between the EU and GB (i.e. goods of EU or UK origin). Determine if your products meet the origin tests to qualify for tariff free trade between the EU and GB and familiarise yourself with the process for supplier statements of origin status for qualifying products.
6. Paying any Customs duty and VAT
How will you pay or defer any customs duty or import VAT payable at the time of import?
For any Duty, can you use the deferral account of your agent. If not, you can pay via a TAN account (which is allocated to traders when they receive an EORI number) or a customs deferment account if you have one. If your goods qualify for tariff free trade with GB under the Trade and Cooperation Agreement, then you will not have to pay Customs duty but you will still have to consider import VAT.
Assess whether you will qualify for postponed import VAT accounting which would eliminate the requirement to pay VAT at the point of import.
7. Export/Import Controls
Understand whether any additional controls will apply to your goods such as licensing requirements, Sanitary and Phytosanitary (SPS) controls or advance notification requirement (e.g. for agri products).
8. Importing into the UK
If you intend to customs clear goods in the UK, ensure you are familiar with the phased plan the UK Government has announced for the introduction of border controls on imports of goods into GB from 1 January 2021 up to July 2021 and the implications and additional criteria if you are not UK Customs established (e.g. the need to have an indirect representative etc.)
9. GB will become a third country for VAT purposes
The VAT rules for trading goods on the island of Ireland will remain the same but the rules for trade in goods between ROI and Great Britain will change and the rules for the supply of certain services cross border to and from GB and between ROI and NI will change also.
Familiarise yourself with how these new rules will operate and apply to your business. For example, those particularly impacted include sellers of goods B2B and B2C into GB from ROI and vice versa and also those supplying certain services B2C from ROI to GB and NI and vice versa.
Determine if any additional VAT considerations will arise from your movement of goods post 1 January 2021 or your supply of services, e.g. additional VAT registration requirements, no requirement to apply VAT on certain B2C supplies of services into GB and NI. Have a look at our recent VAT article (available here) and VAT webinar (available here).
10. Impact on ERP / finance system
As customs declarations will now be required when trading between ROI and GB, this will have consequences for ERP / finance systems. Assess what final changes may be required to your ERP (Enterprise Resource Planning) or finance systems in anticipation of a changed VAT and Customs Duty accounting regime post 1 January 2021.
11. Use of Customs relief / simplifications
Make sure you are aware of the reliefs and simplifications available such as customs warehousing, inward processing relief, transit which could mitigate the impact of Brexit on your business in ROI or GB, in particular in non-transit cases where the goods do not qualify as being of UK or EU origin. A guarantee is often required and, depending on the type, authorisations can take several weeks or months to process. If not in place now these could be put in place subsequently.
The following three criteria are required to enable you to keep trading with GB post 11pm on 31 December 2020.
Make sure you have an EORI number
Make sure you have the ability (in house or via an agent) to file declarations and understand what information is needed for the declarations and if any additional controls apply to your goods movements.
Ensure you have the ability at the time of import to pay or defer any Duty arising on import of goods into Ireland and to pay or postpone import VAT.