Liam Smyth, Director of Trade Facilitation at the British Chambers of Commerce, discusses how to prepare for leaving the Single Market.
The UK left the European Union on 31st January 2020 and the transition period comes to an end on 31 December this year. The Chambers of Commerce, like many other business groups, believe the most important message is that businesses must take action NOW to get ready for a new border operating environment from 1st January 2021.
The revised Border Operating Model published in July brings changes to how goods will be controlled at our borders into a stark reality: businesses need to prepare for a significantly higher level of customs declarations and associated administration. With substantial understatement, the publication concludes, “customs declarations are complicated”.
Declaration volumes will grow from 55 million now, to almost 300 million next year. The cost to British business is estimated at around £7bn per annum, and the customs intermediary market lacks the necessary capacity to deal with this increase.
Taxes and payments
Many AAT licensed accountants will have clients who are importing or exporting (or both) to and from the EU and they face some very big changes in a very short period of time.
Traders importing ‘standard goods’ – covering everything from clothes to electronics – will need to prepare for new customs paperwork. Exporters and importers will need to keep specific records of imported goods and can opt to take up to six months to submit a full customs declaration for goods arriving from the EU.
Taxes will need to be paid on all imports, but payments can be deferred for up to 6 months until July 2021. This will help traders cash flow until the end of 2021, but only if they or their agent has the correct approvals in place to use simplified procedures. Full customs requirements will apply to controlled goods from 1 January 2021 whether they arrive from the EU or elsewhere.
Businesses will be able to account for VAT on goods imports using Postponed VAT Accounting from the start of the new year. This means that once the staged introduction period ends, payment of VAT due on imported goods can be delayed until the next VAT return.
The choice for business
Despite the much-needed clarity on customs procedures, and a welcome delay through the staged introduction of full customs controls, big challenges remain for most businesses.
Declarations volumes will increase, costs will rise, traders need to upskill to deal with new procedures and time is incredibly short.
Companies trading across the globe will need to make a choice. Should they take advantage of the staged introduction of measures for EU imports and gain a cashflow advantage through delayed duty and VAT payments? Or, should they instead stick with the systems and processes they already know, and use the newly introduced postponed VAT accounting and guarantee free deferment accounts to delay border taxes by up to 6 months?
Whatever they decide, businesses that export and import goods face inevitable change.
Help and advice
Some businesses are alert to change and will be preparing themselves or seeking help and advice from accountants and others, whilst some will have their heads buried in the sand and others will simply not know where to turn.
Against this backdrop, the UK approaches the end of transition with a serious shortage of customs agents.
For many small businesses who need specific customs help and advice, Chamber Customs may be able to help. Chamber Customs is the advisory and brokerage service delivered through the British Chambers of Commerce.
Our expert team and our overseas connections make us an ideal customs partner so as businesses get ready for the end of the transition period, our customs agents are ready to help clear their goods at the border.
Further details are available at: www.chambercustoms.co.uk
AAT Comment offers news and opinion on the world of business and finance from the Association of Accounting Technicians.