Post-Brexit: Importing/Exporting to the EU - Questions

[Mike at C&M]

*** No Political or Pro-/Anti-Brexit posts, please ***

 

Along with many other businesses, we recently received letter reference EUEX1044 from HM Revenue & Customs which details (for the first time) what steps we must put in place so that we ready for a no deal Brexit.

 

For a sole trader, or any other small business, the scale of what we need to do is considerable, and for someone who is not familiar with how various systems work, it is also very daunting when we also have the distraction of 'Make Tax Digital', as well as the day-to-day running of our business.

 

The document raises a lot of questions, and I would appreciate if anyone is able to assist with answers that point me in the right direction of what I need to do. If there are any other people who have additional questions relating to this process that I have not asked, please feel free to ask them as well.

 

1)    "... appoint a customs agent..." : What is one of these?

       We import from three different countries within the EU, and their parcels arrive with by Parcelforce or DPD. How do customs agents fit into the supply chain.

 

2)    We have an online shop through which we regularly supply to various EU countries. Do we need a customs agent for what we sent out? We use Royal Mail for these parcels. Again, how will this work.

 

3)     Is there a threshold below which you do not need to use customs agents? Either an annual amount below which you do not need to declare, or use agents.

        Another scenario is the packet of couplings we sent out to Germany last week. Surely we will not have to deal with customs agents for a parcel of £8 in value.

 

4)     Import duties: Are these in addition to VAT?

 

5)     What are "controlled goods"

 

6)      The VAT accounting for imports will change for imports from the EU, this I understand. But what is a customs declaration for importing goods?

 

7)       Am I able to assume that VAT on imports will be recoverable through normal VAT return procedures?

 

Any help is most gratefully received. Thank you

[Joseph_Pestell]

HMRC must be in a bit of panic mode at the thought of all this suddenly kicking in a few weeks time.

 

Dealing in small consignments, I think we can safely say that your courier firms will set up customs agency arrangements. Their current business model will not work otherwise.

 

It won't be worth sending small consignments. The admin costs will far outweigh the value of the items.

 

Import duty will be additional to VAT. But in a no-deal situation, your EU seller will not be charging you VAT. You will be adding VAT when you sell - with VAT also on the duty, rather as we pay VAT on alcohol duty. 

 

"Controlled goods". Firearms, etc. I don't think you need to worry there.

 

There will be forms to fill in for all imports so they can assess the import duty payable.

 

VAT. Yes, as it stands your arrangements for recovering input VAT will not be any different. BUT...VAT was the glaring omission from the EU referendum campaign. It is quite possible that the UK, post-Brexit, could abolish VAT in its current form and replace with a sales tax.

[Nick C]

Do you already ship to non-EU countries? If so I'd assume (possibly naively?) that the same type of customs arrangements would apply? As Joseph_Pestell says, the courier companies will have to be able to deal with such things in order to stay in business themselves!

[Andy Hayter]

Toys (sorry that is what we are dealing with) have zero duties (EU and WTO).  There is therefore a question about whether you will need a customs clearing agent.  Customs clearing agents are there to expedite imports and to pay (on behalf of their customer - you ) any duties required

 

However VAT could end up as a whole can of worms.  In principle you will be able to purchase from the EU VAT free, but you are likely to be charged UK VAT on import.  Likewise you should be able to sell to the EU less VAT - but your customer will probably not love you for it.  For small parcels here in France the post office (La Poste) collects the VAT on behalf of the French Government - and adds a hefty fee for the time and trouble (15 or 20€ IIRC). 

[Joseph_Pestell]

6 minutes ago, Andy Hayter said:

Toys (sorry that is what we are dealing with) have zero duties (EU and WTO).  There is therefore a question about whether you will need a customs clearing agent.  Customs clearing agents are there to expedite imports and to pay (on behalf of their customer - you ) any duties required

 

However VAT could end up as a whole can of worms.  In principle you will be able to purchase from the EU VAT free, but you are likely to be charged UK VAT on import.  Likewise you should be able to sell to the EU less VAT - but your customer will probably not love you for it.  For small parcels here in France the post office (La Poste) collects the VAT on behalf of the French Government - and adds a hefty fee for the time and trouble (15 or 20€ IIRC). 

 

Not everything that we deal with in modelmaking is a toy. But then courier firms will mostly not transport some of those anyway. It had passed me by that toys have zero duty rate under WTO. How strange when many quite basic products can attract high duties!

 

But surely, even if something is zero-rated, there will still be paperwork to complete so that they can calculate the duty owed as £0.00.

 

Shortly before the referendum, I met a lady who planned to vote leave as she thought it would result in less paperwork for her business (mostly dealing with Germany). She is going to be disappointed.

[Robert]

The prospects of less paperwork lie somewhere between no hope and Bob Hope!

 

Here is the German Customs page relating to Brexit (In English)

 

https://www.zoll.de/EN/Businesses/Movement-of-goods/Brexit/brexit_node.html

 

As I understand it, at the very least, VAT will be levied on the value of the goods, plus the carriage.  Often, customs declarations are not relied upon.   For example, if I order something from a third country (which I usually avoid doing, and which the UK will shortly be) I have to present the invoice to customs to inform them how much I paid for the article, and the VAT, plus duty (if applicable), plus fees are levied on that value.

 

If the "deal" is agreed, then everything stays more or less the same for two years.  Then the negotiations will begin again.

[Jonboy]

1) for smaller parcel consignment imports the carrier often acts as customs agent and levies a small fee( £8/£13 for parcel force) for the privilege, making small orders from suppliers less viable. They can also be a bit random in how they classify goods and the duties you then pay accordingly.

 

2) for outbound via Royal Mail you should be able to just use a cn22 on the outside of the parcel, as it is the recieving country that levy import duties and taxes, Note the cn22 process is being dropped worldwide at the end of the year in favour of advance notification online...see Royal Mail for details.

 

3) for infrequent orders it is worth just using the carrier to clear customs on your behalf. Note that not suppling detailed information on exports can cause delays and extra expense for your customers. E.g. instead of invoice/receipt saying “Hornby  R186” say “Hornby R186 model railway accessory”. If you can supply a commodity code even better (your suppliers will likely have a list on request). Some countries have a threshold under which they don’t levy charges, but it is country by country ( or harmonised single market!) thing and your customers responsibility to investigate before importing and then pay.

 

4)import duties are levied on the cost of the goods, carriage/packaging to you and then VAT is levied on top. On hobby/craft items duty’s are typically in the region of 6.5%,(beware the anti-trump tariffs if importing from the USA).the VAT can be reclaimed on your VAT return, but be aware your customs clearing agent will invoice you for the duty and VAT, but you technically cannot reclaim until it is listed on a C79 form that hmrc send out monthly as this is the proof. Duty cannot be reclaimed.

If importing a lot it is worth setting up a deferment account, giving you 30 days to pay direct to HMRC. (Customs agents typically charge 1.5% of the outlay to use their deferment, subject to a minimum fee). I believe the interim arrangements for eu imports are going to be on a deferred basis, which should help you avoid a cash flow shock.

 

5)controlled goods, anything that needs a license to import or export (medicines, guns, parts that could be used to make weapons etc. Etc.).

 

6) customs declaration is a set of documents detailing what is being imported, value and country of origin (where made, not where you are buying from) that your customs agent submit electronically to hmrc to clear customs.

If you can get your supplier to proactively show the 8digit commodity code on the paperwork(you can find them on uktradeinfo.com but there are circa 65k of the blighters so worth getting a customs agent to guide you in the early days) you can also search them on .gov.uk to see the rate of import duties that should apply in advance.

 

7) yes as long as the c79 has arrived if cleared against your VAT number or an invoice from carrier( or some put a receipt sticker on the parcel). It is worth ticking off the entries on the c79 when it arrives and noting which supplier and invoice number it relates too in case of later inspections.

 

[Jonboy]

8 hours ago, Andy Hayter said:

Toys (sorry that is what we are dealing with) have zero duties (EU and WTO).  There is therefore a question about whether you will need a customs clearing agent.  Customs clearing agents are there to expedite imports and to pay (on behalf of their customer - you ) any duties required

 

However VAT could end up as a whole can of worms.  In principle you will be able to purchase from the EU VAT free, but you are likely to be charged UK VAT on import.  Likewise you should be able to sell to the EU less VAT - but your customer will probably not love you for it.  For small parcels here in France the post office (La Poste) collects the VAT on behalf of the French Government - and adds a hefty fee for the time and trouble (15 or 20€ IIRC). 

 

Zero duties doesn’t automatically waive the VAT payable upon import and the need for a customs clearance accordingly, particularly on commercial orders that tend to be larger than single domestic items...

[Andy Hayter]

Agree totally Jonboy.  Duty and VAT are two very different things and only have one thing in common.  They increase the cost of an item.

[kevinlms]

As an outsider, how can any 'rules' be set up, when no one knows (least of all the British government), as to whether there will be a deal or not?

[Jonboy]

Everybody in transport/logistics/purchasing etc are currently basing their revised procedures on no deal, and all the rules becoming the same as dealing with the rest of world....if anything less is agreed it will (hopefully) be less work.

[Bernard Lamb]

3 hours ago, kevinlms said:

As an outsider, how can any 'rules' be set up, when no one knows (least of all the British government), as to whether there will be a deal or not?

Some changes will come about whatever the outcome. 

Ryan Air have cancelled some flights to places in eastern Europe from April. This works out at around an extra £700 and 20 hours of hanging around in airports this year to start with for my family. The new "rules" are up and running.  

Friends who have lived in the UK for over 40 years are having to fill in a form to allow them to stay. Another example of a "rule" that is in place.

Regarding most other thing we just have to wait, but can at least prepare for the various options.

 

Bernard

Edited February 14, 2019 by AY Mod

[Joseph_Pestell]

1 hour ago, Bernard Lamb said:

Some changes will come about whatever the outcome. 

Ryan Air have cancelled some flights to places in eastern Europe from April. This works out at around an extra £700 and 20 hours of hanging around in airports this year to start with for my family. The new "rules" are up and running.  

Friends who have lived in the UK for over 40 years are having to fill in a form to allow them to stay. Another example of a "rule" that is in place.

Regarding most other thing we just have to wait, but can at least prepare for the various options.

 

Bernard

 

At risk of going OT,I don't think you should blame Brexit for Ryanair's routing policies. In winter, they cut flights to Southern France and Spain as reduced demand from holidaymakers. Put the aircraft on other routes to ski resorts and for foreign nationals to go home for Xmas etc. Come the summer, get more money flying Brits to France and Spain.

 

3 hours ago, kevinlms said:

As an outsider, how can any 'rules' be set up, when no one knows (least of all the British government), as to whether there will be a deal or not?

 

Exactly. That is why the business community is so hacked off right now. It can deal with either "deal" or "no-deal" scenarios. But very difficult to work for both contingencies at such short notice - and very expensive.

Edited February 14, 2019 by AY Mod

[TheQ]

11 minutes ago, Bernard Lamb said:

 

Ryan Air have cancelled some flights to places in eastern Europe from April. This works out at around an extra £700 and 20 hours of hanging around in airports this year to start with for my family. The new "rules" are up and running.  

 

Ryan Air ran out of Pilots last year and had to cancel hundreds of flights, I wouldn't be surprised if this is just an extension of that...

[Widnes Model Centre]

Between Making Tax Digital, for which there is still no official communication from HMRC. (MTD starts in April 2019) and this......leads to this....

Model Shop For Sale. Next year you could be millionaires.

[GeoffAlan]

23 hours ago, Joseph_Pestell said:

 

Not everything that we deal with in modelmaking is a toy. But then courier firms will mostly not transport some of those anyway. It had passed me by that toys have zero duty rate under WTO. How strange when many quite basic products can attract high duties!

 

But surely, even if something is zero-rated, there will still be paperwork to complete so that they can calculate the duty owed as £0.00.

 

Shortly before the referendum, I met a lady who planned to vote leave as she thought it would result in less paperwork for her business (mostly dealing with Germany). She is going to be disappointed.

I'm not convinced that toys are zero rated. Certainly I've previously paid import duties on Kato model railway rolling stock and locos. The VAT, other duties and fee from the courier add up fast.

[Bernard Lamb]

1 hour ago, Joseph_Pestell said:

 

At risk of going OT,I don't think you should blame Brexit for Ryanair's routing policies. In winter, they cut flights to Southern France and Spain as reduced demand from holidaymakers. Put the aircraft on other routes to ski resorts and for foreign nationals to go home for Xmas etc. Come the summer, get more money flying Brits to France and Spain.

 

 

 

As you state they cut flights according to demand. The only reason that I know about for cutting flights to certain destinations in eastern Europe is that there are less people coming and going between these places and the UK. This has nothing to do with seasonal changes. It is entirely down to the uncertainty caused by Brexit.

Bernard

[Widnes Model Centre]

19 minutes ago, GeoffAlan said:

I'm not convinced that toys are zero rated. Certainly I've previously paid import duties on Kato model railway rolling stock and locos. The VAT, other duties and fee from the courier add up fast.

 

All our invoices have VAT added to them. Only exception are books, magazines and catalogues.

Edited February 14, 2019 by Widnes Model Centre
grammar

[Karhedron]

4 hours ago, kevinlms said:

As an outsider, how can any 'rules' be set up, when no one knows (least of all the British government), as to whether there will be a deal or not?

 

My understanding is that the above information explains what needs to be done in the event of a no-deal Brexit. If a deal is agreed then we will get the 21-month transition period in which to negotiate new arrangements. During this transition period, things will broadly stay as they are now. But the important point is that we will only get a transition period IF a deal is agreed by both the UK and EU.

 

This is why a no-deal is sometimes referred to as "crashing out". It is the difference between walking down a flight of stairs in a planned way and falling then same distance.

[McC]

39 minutes ago, GeoffAlan said:

I'm not convinced that toys are zero rated. Certainly I've previously paid import duties on Kato model railway rolling stock and locos. The VAT, other duties and fee from the courier add up fast.

 

All model railway items are zero Duty items, whether you are importing from China, the USA, or Frankfurt.

 

VAT however, from the rest of the EU would be charged at the point of sale, post Brexit you may be able to buy from other EU countries 'ex VAT' with the risk / assumption that Royal Mail will then collect 20% from you at the doorstep.

[Enterprisingwestern]

8 hours ago, McC said:

 

All model railway items are zero Duty items, whether you are importing from China, the USA, or Frankfurt.

 

VAT however, from the rest of the EU would be charged at the point of sale, post Brexit you may be able to buy from other EU countries 'ex VAT' with the risk / assumption that Royal Mail will then collect 20% from you at the doorstep.

 

Sorry if this is a slight OT diversion, but how do those of us outwith the UK purchase our "toys" from UK model suppliers in this scenario?

 

Mike.

[jpendle]

13 minutes ago, Enterprisingwestern said:

 

Sorry if this is a slight OT diversion, but how do those of us outwith the UK purchase our "toys" from UK model suppliers in this scenario?

 

Mike.

If you are outside the EU then nothing changes.

 

The bigger sellers already have this stuff sorted out.

 

Regards,

 

John P

[Neil]

18 minutes ago, Enterprisingwestern said:

 

Sorry if this is a slight OT diversion, but how do those of us outwith the UK purchase our "toys" from UK model suppliers in this scenario?

 

Mike.

 

3 minutes ago, jpendle said:

If you are outside the EU then nothing changes.

 

The bigger sellers already have this stuff sorted out.

 

Regards,

 

John P

 

Given that the OP is from a well respected, well known model shop and asks lots of pertinent questions I'm not sure that 'this stuff' is already sorted out.

 

 

[Mike at C&M]

1 minute ago, Neil said:

 

 

Given that the OP is from a well respected, well known model shop and asks lots of pertinent questions I'm not sure that 'this stuff' is already sorted out.

 

 

For customers outside the EU, nothing changes under 'Brexit'

[Bernard Lamb]

1 minute ago, Neil said:

 

 

Given that the OP is from a well respected, well known model shop and asks lots of pertinent questions I'm not sure that 'this stuff' is already sorted out.

 

 

Indeed.

A situation cropped up at home  today regarding insurance. It was for people from various EU and non EU countries going on holiday together, rather than goods, but I was informed that the same uncertainties applied.

I would suggest that any trader keeps an eye on the situation, in particular as regards the ownership of goods at various points, until there is some definitive advice available.   

Bernard