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VAT and duty changes post 31 December 2020

Preparation. We do it all the time. We may prepare for a meeting with the bank manager or our child’s teacher, for example. It makes us feel more confident about situations and often leads to a better outcome. So, how do you prepare for VAT and duty changes when the UK leaves the EU on 31 December?

As we battle with a Coronavirus pandemic, Brexit is often put to the back of our minds. There is a lot to think about before the 31 December, but it can be and needs to be done. “Before anything else, preparation is the key to success,” said Alexander Graham Bell. And in terms of Brexit preparations, he’s quite right.

In a perfect world, we would know if it’s going to be a deal or no deal. But, as we don’t, understanding what either scenario could mean for your business is important.

What could a deal look like?

If the UK has a deal in place by 31 December, what could the trading arrangements look like? Well, we’ll no longer be a member of the European Market and will adopt the Global Tariff Rate. On the 19th May 2020, the UK Government announced that the new UK Global Tariff (UKGT) will replace the EU’s Common External Tariff on 1 January 2021.

Cheaper to import goods to UK – The UKGT could mean that rates are lower when buying goods from the EU or third countries. However, a word of caution, because if you want to sell to the EU or return goods bought from the EU, the new Global Tariff could be more expensive.

Simplifying the admin – The Government has said it is streamlining and simplifying nearly 6,000 tariff lines, and lowering costs for businesses by reducing administrative burdens. For example, rounding tariffs down to standardised percentages and getting rid of all ‘nuisance tariffs’ (those below 2%).

You can familiarise yourself with the new UKGT at to find out how your business may be affected. Many products will be cheaper for consumers post 31 December as a result, including ground thyme. A little interesting fact there!

The new postponed accounting system – Although we’ve included this in the ‘deal’ section, the postponed accounting system will also apply if we have a ‘no deal’ scenario. Postponed accounting means that the importer does not pay import VAT when the goods arrive at the UK port or airport: it is deferred.

This system means that there are no adverse cash flow issues of paying VAT and waiting up to three months to claim import tax as we have at the moment.

Consider import duty for your supplies coming in. Then if you export your finished product to the EU, there will be further duty to pay. Plan now who will process the duty declaration payment.

In the event of a ‘no deal’

If you export products to the EC, you will need to consider how they are going to travel. Is it by boat or by air? Have you made the declaration to HMRC before the goods leave your factory? You will need to declare the goods to HMRC and complete the paperwork before your products arrive at the airport. If not, they won’t be able to travel.

The goods will also be subject to import VAT and duty once they arrive in the EC. Your customer may ask you to cover that cost. Either way, it must be agreed ahead of the journey. If you need to pay, how will you cover that cost?

The benefits of planning now

At THP, we’re speaking to our clients now about VAT and duty changes. We asking about their chain of transactions, and we’re advising on efficient tax payments and documentation.

Take the time to speak to your accountant now about which country your business should register for VAT. And if you should defer your import duty payment until a full customs declaration is announced.

If you take advice from your accountant now, you can avoid delays to your business and unnecessary and unexpected charges. What you don’t want is to have your goods stuck on a lorry somewhere without the correct paperwork. You will lose customer money and almost certainly have to pay storage costs while the paperwork is completed.

For more practical advice and business insights, you can follow us on Twitter and LinkedIn

Avatar for Liz Cordell
About Liz Cordell

I’m an experienced copywriter, with a great attention to detail. Having previously held positions at a global publisher, a top 100 law firm and a Big Four professional services firm, I now work with clients across a range of industries. Whether it’s new content for a website or creating interesting blogs for my clients, I can create engaging copy that doesn’t take a lifetime to read.

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