Brexit - VAT & Customs

Critical issues for businesses to consider:

• Impact on the Supply Chain: Review and map the movement of goods into and out of the UK to understand the disruption to supply chains caused by Brexit and actions to mitigate disruption. Both tariff and non-tariff costs should be reviewed.

• Do you trade with NI? Under the NI Protocol, NI will remain part of the EU VAT regime and Customs Union for goods only. Normal Intra-EU Community VAT rules will continue to apply to such trade with the prefix “XI” applying instead of “GB” for VAT number identification on invoices and statistical declarations.   

• Are you registered for Customs? An EORI number is required to allow a business to export goods from ROI to the UK and import goods from the UK into ROI.   

• Will Customs Duty apply? The Trade and Cooperation Agreement between the EU and the UK provides for duty and quota free access to the respective markets.  Please note however that there is a sting in the tail and the agreement only applies to goods that meet certain criteria and in particular a business must ensure that the goods comply with complex rules regarding the “origin” of the goods. Advice should be sought to ensure your products qualify to avoid the payment of tariffs (which are not recoverable and are an additional cost to your business).   

• Are you in a position to file Customs Declarations? A non-tariff cost of the changes is the length of time and the cost of getting goods physically cleared at the relevant borders and filing of the relevant Customs Declarations. Customs Declarations (Import and Export Declarations) will be required to physically move goods from ROI to the UK and vice versa. The accurate and timely filing of such declarations is vital for speedy customs clearance. The key question for business is: Are you going to complete Customs declarations in-house or employ a clearance agent? Either way a business must put the necessary process and controls in place to ensure the accurate and timely submission of the relevant Customs Declarations.

• VAT on Importation: Once a business is approved by the Irish Revenue, Postponed accounting for VAT will apply to all importation of goods from 1 January 2021. This is a significant cash flow saving measure where businesses will no longer pay VAT at importation but will self-account for any VAT due through the relevant VAT return (e.g. An Irish business purchases goods from the UK in January 2021, it will pay no VAT on importation and include/self-account for any VAT due as part of its January/February 2021 VAT return).

• Can you avail of any VAT and Customs Reliefs? Businesses need to consider whether they can avail of any reliefs which can delay or reduce the Customs and VAT impact. Such reliefs include the use of a Customs Warehouse, Inward processing relief etc.

• Contracts: Commercially all contracts need to be reviewed to understand and quantify the impact the VAT and Customs changes will have on your business. This must include a review of a contract’s Incoterms (international commercial terms) to establish who is responsible for the filing of Customs Declarations, Customs clearance, payment of Customs Duty, etc.

• ERP System Impact: Businesses should assess what changes will be required to their ERP/financial systems and the cost of same to take account of the new Customs and VAT requirements and changes outlined above.