Archive for September, 2018

Customs procedures with a no deal Brexit

Thursday, September 6th, 2018

Last week we posted an article advising businesses that trade with the EU of guidance that HMRC have issued in the event that we do not reach an accommodation with the EU when we leave March 2019.

This week we are paraphrasing, from HMRC’s guidance announcements, the likely changes to customs procedures if the so-called “no deal” scenario becomes a reality. Essentially, the two-way, free movement of goods between the UK and the EU will cease and the raft of changes that firms trading with the EU will need to accommodate are significant.

Whilst the political process is deadlocked, or so it would seem, the information shared below is very much the worst possible out come for importers and exporters to the EU from a red-tape perspective. If the government is successful in negotiating a softer version for the UK exit from the EU, then some, or perhaps all, of the following changes may not have to be made.

As we indicated last week, contingency planning should now include at least an appreciation of the import/export changes that will need to be faced if we leave the EU with no deal. And so, warts and all, this is what will need to be considered.

The specific customs changes would include:

  • Businesses would have to apply the same customs and excise rules to goods moving between the UK and the EU as currently apply in cases where goods move between the UK and a country outside of the EU (customs duty may also become due on imports from the EU. This means customs declarations would be needed when goods enter the UK (an import declaration), or when they leave the UK (an export declaration).
  • Separate safety and security declarations would also need to be made by the carrier of the goods (this is usually the haulier, airline or shipping line, depending on the mode of transport used to import or export goods).
  • The EU will be obliged to apply customs and excise rules to goods it receives from the UK, in the same way it does for goods it receives from outside of the EU. This means that the EU would require customs declarations on goods coming from, or going to, the UK, as well as requiring safety and security declarations.
  • The Excise Movement Control System (EMCS) would no longer be used to control suspended movements between the EU and the UK. However, EMCS would continue to be used to control the movement of duty suspended excise goods within the UK, including movements to and from UK ports, airports and the Channel tunnel. This will mean that immediately on importation to the UK, businesses moving excise goods within the EU, including in duty suspension, will have to place those goods into UK excise duty suspension, otherwise duty will become payable.

Before importing goods from the EU after 29 March 2019

UK businesses will need to:

  • Register for an UK Economic Operator Registration and Identification (EORI) number. Businesses are advised by HMRC that they do not need to do anything now. For those businesses that sign up for the EU Email updates, they will be contacted when this service becomes available.
  • Ensure their contracts and International Terms and Conditions of Service (INCOTERMS) reflect that they are now an importer.
  • Consider how they will submit import declarations, including whether to engage a customs broker, freight forwarder or logistics provider (businesses that want to do this themselves will need to acquire the appropriate software and secure the necessary authorisations from HMRC).
  • Decide the correct classification and value of their goods and enter this on the customs declaration.

When importing goods from the EU after 29 March 2019, a business will need to:

  • Have a valid EORI number.
  • Make sure that their carrier has submitted an Entry Summary Declaration at the appropriate time.
  • Submit an import declaration to HMRC using their software, or get a customs broker, freight forwarder or logistics provider to do this for them.
  • Pay VAT and import duties including excise duty on excise goods unless the goods are entered into duty suspension (for example a customs or excise warehouse – a financial security will be required to cover the duty liability of the goods whilst they are being moved to the warehouse). Import VAT may also be due although HMRC have indicated that this process may be dealt with on the VAT return thus delaying any cost impact at the time of import.
  • Once excise goods leave a customs suspensive arrangement, they may be immediately entered into an excise duty suspension regime. A business will need to declare the goods on EMCS for onward movement via a Registered Consignor.

Businesses may also need to apply for an import licence or provide supporting documentation to import specific types of goods into the UK, or to meet the conditions of the relevant customs import procedure.

Before exporting goods to the EU, a business will need to:

  • Register for an UK Economic Operator Registration and Identification (EORI) number. You do not need to act now, but you will want to familiarise yourself with this process.
  • Ensure that contracts and International Terms and Conditions of Service (INCOTERMS) reflect that you are now an exporter.
  • Consider how you will submit export declarations, including whether to engage a customs broker, freight forwarder or logistics provider (businesses that want to do this themselves will need to acquire the appropriate software and secure the necessary authorisations from HMRC). Engaging a customs broker or acquiring the appropriate software and authorisations from HMRC will come at a cost.

When exporting goods to the EU, a business will need to:

  • Have a valid EORI number.
  • Submit an export declaration to HMRC using their software or on-line, or get their customs broker, freight forwarder, or logistics provider to do this for them. The export declaration may need to be lodged in advance so that permission to export is granted before the goods leave the UK (the export declaration also counts as an Exit Summary Declaration).
  • Businesses may also need to apply for an export licence or provide supporting documentation to export specific types of goods from the UK, or to meet the conditions of the relevant customs export procedure.

When exporting duty suspended excise goods to the EU, a business will need to continue to use EMCS to record the duty suspended movement from a UK warehouse or premises to the port of export.

Readers who are considering their options and are engaged in contingency planning for their trade with the EU after March 2019, may be less than enthusiastic if they have managed to reach this part of our article. If you want more information you could read HMRC’s notes on the subject here: https://www.gov.uk/government/publications/trading-with-the-eu-if-theres-no-brexit-deal/trading-with-the-eu-if-theres-no-brexit-deal#what-businesses-trading-with-the-eu-need-to-know.

Or please call. We can help you consider your options and keep you abreast of any changes as and when the political negotiations are concluded.

Spreadsheets and VAT from April 2019

Tuesday, September 4th, 2018

Making Tax Digital (MTD) is HMRC’s long running intention to make an electronic link with the accounting data of UK businesses. The idea is to draw in the data they need directly from your computers using links provided by your software developers for this purpose.

Which is fine if you are using accounts software that will accommodate these changes.

The first implementation deadline for MTD is 1 April 2019, when all businesses registered for VAT, and with turnover in excess of £85,000, will need to submit returns using HMRC’s MTD processes.

Certainly, the accounts software that we use to prepare and submit returns for clients will be approved for MTD, and in most cases will not require the use of spreadsheets. 

The reason for this post is to clarify what traders, who do use spreadsheets to prepare data for their VAT returns, will need to do in order to become MTD compliant. There are two basic groups affected:

• Businesses who use spreadsheets in place of accounting software, generally smaller traders, and

• Larger concerns, with complex VAT issues – perhaps with multiple branches and partial exemption rules to consider – who cannot undertake the necessary calculations without copying summarised data from their accounts software into a spreadsheet to prepare the actual numbers for their VAT form.

HMRC has confirmed that it is happy for traders to continue using spreadsheets in these ways as long as the process involves the use of “bridging software”.

HMRC does not want you to upload data from a spreadsheet if this disconnects the summarised information provided, from the detailed transactions that make up the return. In other words, they want the figures on your VAT return to be linked to the underlying transactions. They do not want you to cut and paste data and break this link. Which is where bridging software will be used to maintain these links.

We are seeing an increasing number of software companies offer this type of facility. If you are VAT registered, have turnover in excess of £85,000 and use spreadsheets to prepare data for your VAT returns, please get in touch so we can help you regularise your position for returns to be submitted after April 2019.