Brexit – Customs Implications Gerry Myton 13Th November 2019

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13/11/19

The VAT & Customs Consultancy

Brexit – Customs Implications Gerry Myton 13th November 2019

The VAT & Customs Consultancy

1 13/11/19

The VAT & Customs Consultancy

CCG Backstop Labelling

EORI

AEO

Brexit NES

SAD

Origin

IP/OP CFSP C88

2 13/11/19

The VAT & Customs Customs - Hard Brexit (default) Consultancy

• UK leaves the EU on March 29, 2019, on June 30, 2019, on 31 October 2019?

• Third country rules and tariffs (WTO) apply – full border controls

• Time pressure to ‘grandfather’ existing EU FTAs

• Customs declarations increase to 300m annually/145,000 additional businesses to make customs declarations

The VAT & Hard Brexit – no agreement no transition Customs period Consultancy

• The UK will be a non-EU country

• Goods moving between the UK & EU must be cleared through Customs.

• Declarants, i.e. importers and exporters responsible for the customs clearance

• Declarant can clear goods through customs or use a forwarding agency.

• Smooth customs clearance and electronic declarations often require authorisations granted by customs authorities.

• EU will apply its regulation and tariffs at borders with the UK as a 3rd country,

• EU will require checks and controls for customs, sanitary and phytosanitary standards.

• Border Inspections will cause road traffic congestion & problems in ports.

• Intrastat declarations cease from the statistical month following the month of withdrawal.

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The VAT & Customs What should you be doing Consultancy

• Review intra-EU supply chains

• Evaluate additional costs – find your duty hotspot, brokerage requirements

• Review terms and conditions (Incoterms/Origin)

• TSP/EORI

The VAT & Customs Documents required for customs Consultancy clearance

• Commercial Invoice • ATA Carnet

• Customs Value Declaration • TIR Carnet

• Freight documents • Freight insurance

• Bill of Lading • Packing list

o FIATA Bill of Lading • Single Administrative Document (SAD)

o Road Waybill • Documents associated with the SAD

o Air Waybill https://trade.ec.europa.eu/tradehelp/documents- customsclearance o Rail Waybill

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The VAT & Customs Importing from EU after Brexit - Consultancy Checklist Step 1 Make sure your business has an EORI number that starts with GB:

Step 2 Decide who will make the import declarations:

Step 3.1 Apply to make importing easier: 'transitional simplified procedures' Common Transit Convention (CTC).

Step 3.2 Set up a duty deferment account if you import regularly:

Step 4 Check the rate of tax and duty you’ll need to pay: Payment of – customs duties and VAT on all imports. excise duties if you’re importing alcohol, tobacco or biofuels.

Step 5 Check if you need a licence or certificate for the type of goods you import:

Step 6 Get help and support

SOURCE: https://www.gov.uk/prepare-import-to-uk-after-brexit

The VAT & Customs Exporting to EU after Brexit - Checklist Consultancy

Step 1.1 Make sure your business has an EORI Step 4: Check what you need to do for the type number that starts with GB of goods you export: Export Licence / Excise Control / Controlled Goods Step 1.2 Check your importer has an EU EORI number Step 5: Find out how changes to VAT will affect you VAT Refunds from EU Step 2.1 Decide who will make the export Digital Services sales in EU declarations (Internal/External) Step 6: Decide who will transport your goods Step 2.2 Decide if you want to export your outside the UK goods using CTC (Common Transit Convention) Step 7: Get help and support

Step 3: Check the rate of tax and duty for your SOURCE: https://www.gov.uk/prepare-export-from- goods. uk-after-brexit

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The VAT & Customs Incoterm Rules 2010 Consultancy

The VAT & Customs Incoterms 2020 Rules Consultancy

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The VAT & Customs Transitional Simplified Procedures Consultancy (TSPs) Transitional Simplified Procedures will make importing goods easier for the initial period after the UK leaves the EU

Traders registered for TSP will not need to make full customs declarations at the border and will be able to defer paying their customs duties.

If you are a VAT registered business which imports from the EU you should have been automatically registered for TSP.

To be eligible, traders must:

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Be established in the UK Have the intention to import Have an Economic Operator Registration goods in the UK from the EU Identification (EORI) number

The VAT & Customs TSP declaration process Consultancy

Controlled goods the Trader:

• Submits a simplified frontier declaration

• Ensures all necessary certificates and licences are available.

• Submit a supplementary declaration by the fourth working day of the month

Standard goods the Trader:

• Makes a declaration directly in their commercial records prior to goods arriving at the UK Border.

• Updates records with date and approx. time goods arrive in UK

• Submits a supplementary declaration by the fourth working day of the following month

HMRC will allow up to 6 months before you need to start making supplementary declarations from 1/11/2019

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The VAT & Customs Rules of Origin Consultancy

• Determine economic nationality of goods

• Manufacture in which the value of the of the non-originating material does not exceed x% of the ex-works price

• Declaration of origin

• EU supplies – UK importers should speak to supplier in no deal scenario

The VAT & Customs UK Trade Agreements Post Brexit Consultancy SIGNED TRADE AGREEMENTS WITH COUNTRIES & TRADING BLOCS Effective when UK leaves the Eu (as at 9th October 2019) Andean countries South Korea CARIFORUM trade bloc Switzerland Central America Tunisia Chile Eastern and Southern Africa * The SACU+M trade bloc countries (ESA) trade bloc are: Botswana, Eswatini (Swaziland). Faroe Islands Lesotho Mozambique, Namibia, Iceland and Norway South Africa (expected to sign Israel shortly) Lebanon Liechtenstein SOURCE: https://www.gov.uk/guidance/uk-trade-agreements-with- Pacific states non-eu-countries-in-a-no-deal-brexit Palestinian Authority Southern Africa Customs Union and Mozambique (SACU+M) trade bloc*

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The VAT & Customs What should you be doing Consultancy

Customs – Reliefs/Regimes

• Trusted trader’ kitemark (AEO)

• Deferment Account /CCG

• Customs Warehousing

•IP

•OP

• All require Authorisation and Guarantee

The VAT & Customs Authorised Economic Operator - AEO Consultancy

The AEO programme forms part of the World Customs Organisation (WCO)SAFE Framework of Standards to Secure and Facilitate Global Trade

Introduced to act as a deterrent to international terrorism, secure revenue collections and promote trade facilitation worldwide

The EU introduced two AEO schemes

• AEOS –security and safety

• AEOC –customs simplification (fiscal compliance)

A business can have both AEOS and AEOC

Legislation has been be put in place to establish a UK AEO scheme if the UK leaves the EU without a deal

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The VAT & Customs AEO Criteria Consultancy

In order to achieve AEO status, a business must meet the following criteria:

• Compliance with customs and other taxes related to the economic activity of the business.

• Satisfactory management of commercial and transport records.

• Financial solvency

• Practical standards of competence or professional qualifications (this is not required for AEOS).

• Security and safety standards (not required for AEOC)

• How to apply:

• Application Form C117, Self Assessment Questionnaire Form C118 & Explanatory notes

The VAT & Customs Trade benefits of AEO Security & Safety Consultancy

• Reduced risk rating

• Reduced data requirements (PAPD)

• Reduced physical & documentary control

• Priority treatment when goods selected for examination

• Notification of risk selections

• Quicker release of goods

• Enhanced reputation & image

• Mutual recognition

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The VAT & Customs Trade benefits of AEO Customs Consultancy Simplifications

A holder of an AEOC status can benefit from being able to qualify for:

• a notification waiver when making an EIDR

• a 70% reduction in a business’s deferment account guarantee

• undertaking centralised clearance (when available)

• completing self assessment (when implemented)

• AEOC holders could also benefit from a faster application process for customs simplifications, authorisations and reductions or waivers of potential debt guarantees.

The VAT & Customs Inward Processing Relief IPR Consultancy Outward Processing Relief OPR • Trade facilitation measure.

• IPR: o Relief from Customs Duty and import VAT on goods that are imported from outside the EU (UK) to be processed, and then exported outside the EU, or released for free circulation in the EU. o Excise Duty is also suspended when goods are entered into IP.

• OPR o Goods temporarily exported for processing to be re-imported o Relief from duty when re-imported

https://www.gov.uk/guidance/inward-processing https://www.gov.uk/guidance/outward-processing-relief-opr

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The VAT & Customs Customs Freight Simplified Procedures Consultancy (CFSP)

ADVANTAGES • Accelerated release of goods at the border • Import entries can be deferred • Entry in Declarants Records in lieu of declaration

REQUIREMENTS INCLUDE • Trader must have approval to use CFSP • Agents must also be approved to use CFSP • the use of a deferment account

OTHER POINTS • Current CFSP authorisation may have to be expanded for EU goods as well as non EU goods • If undertaking CFSP on behalf of others it must be on an indirect basis

https://www.gov.uk/government/publications/vat-notice-760-customs-freight-simplified-procedures

The VAT & Customs Deferment Account Consultancy

• Needed for operation of TSP if duties payable

• Trader must o be approved for deferment o set up direct debit o set up guarantor (bank/insurance company) o complete a standing instruction (C1207) for agent to make entry against trader’s deferment

• Trader may use agent’s deferment, but must check entries

• Consider reconciliation against HMRC Management Support Systems (MSS) data reports

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The VAT & Customs Any deal will do in Boris Johnson’s Consultancy Amazing Technicolor Nightmare

The VAT & The island of IRELAND conundrum Customs Consultancy

Centre of the universe

•

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The VAT & Customs The Irish border Consultancy

• Customs declarations will be necessary – more border checks for NI companies dealing with England/Scotland/Wales than ROI

• Customs/regulatory boarder on Irish Sea – whilst NI still in UK customs Union

• 56% of all NI trade with GB - £18.1bn

• Trade ROI = 16%

The VAT & Customs The Irish border Consultancy

• Vague on goods moving West East

• East West movements will require Entry Summary Declaration

£15-56 per declaration – HMRC estimate

• Extra costs associated with GB goods to Ireland

Customs checks /documentation re agri/food providers - €55 min fee set by EU

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The VAT & Customs Other Issues Consultancy

• Labelling

• FBO address

• EU organic logo

• EU emblem

• EU health and identification marks (POAO)

• Soivre (Spain)

• Country of Origin label

The VAT & Customs Consultancy

Excise Duty – Know Your Customer

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The VAT & Customs Excise Duty – Suspect Supply Chains Consultancy

• Goods start out as genuine supplies and then transition to illicit through a complex network of contrived movements and transactions

• The main fraud types such as inward diversion rely upon large volumes of UK- produced goods being available under duty suspension in Europe

• Consignments of low-EU duty paid goods appear to enter overseas markets but are actually diverted into the UK under cover of illegal ‘mirror loads’

• Once in the UK the illicit goods infiltrate the independent wholesale and retail market via UK missing trader supply chains and off-record sales

The VAT & Customs Outward Diversion Consultancy

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The VAT & Customs How Inward Diversion Fraud Works Consultancy

The VAT & Customs How Transit Diversion Fraud Works Consultancy

Duty Lost £180,000

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IRE2 High Risk Supply Chain FY UK in – 43,920 UK3 UK out – 109,962 2019 UK in – 12,101 UK out – 1,206 EU In – 4,163 EU Out – 16,947 FR4 UK1 UK Out – 1,206 UK In – 602,350 UK4 UK Out – 53,213 UK in – 1,206 EU In – 45,180 EU out – 1,206 EU Out – 43,920 BEL1 UK out – 17,861 UK5 Key UK in – 9,805 EU In – 109,962 EU Out – 109,939 UK to UK FR1 or UK in – 149,530 UK to EU UK2 Warehouse UK6 UK in – 66,425 UK out – 3,514 UK Out – 56,408 EU to UK UK Out – 938,032 EU in – 14,904 EU Out – 1,125,319 FR2 UK in – 14,310 UK Based UK7 W/house UK in – 14,832 EU out – 25,974 FR3 EU based UK in – 17,982 W/house UK11 UK Out – 13,212 UK8 EU In – 13,212 UK in – 24,912 EU out – 27,756 EU based W/house NED1 With no UK in UK out – 14,256 UK9 UK in – 333,954 EU in – 30,501 NED2 UK out – 16,245 IRE3 UK10 UK Out – 39,735 EU in – 39,735 IRE1 UK in – 1,125,319 UK out – 58,392 Official 35

The VAT & Customs Letters confirming Tax Loss Consultancy

• HMRC letters advising of revenue losses are issued when it can be demonstrated that VAT or another tax has not been accounted for on an onward supply

• Tax losses in alcohol supply chains are strongly indicative of excise diversion fraud – particularly when the loss occurs at the end of a long and complex supply chain

• HMRC tax loss letters are usually the result of painstaking research, often involving multiple overseas partners, and help identify suspect trading activity and contrived supply chains

• In persistent cases where significant or multiple tax losses occur HMRC will consider dealing with the abuse by removing reliefs and make all transactions liable to VAT

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The VAT & Customs Contact Consultancy

GERRY MYTON Mob : 07776178473 T: 01753 708955 [email protected] https://vatcustomsconsultancy.com