In July 2020, The Border Operating Model was released by the Government which outlines how goods will be treated when arriving into Great Britain (‘GB’) from 1 January 2021 when the transition period ends. An updated version was released at the beginning of October 2020. It is important to note that this only covers the movement of goods between the EU and GB and does not cover the Northern Ireland Protocol, although traders that are moving goods to/from Northern Ireland can sign up to the new Trader Support Service here.
HMRC are regularly releasing updated information so the content in this summary could still be subject to change.
For changes to supplies of services from 1 January 2021 please visit here.
What is the Border Operating Model?
The Border Operating Model is an extensive document and this article is a high-level summary of the changes and requirements. Further details regarding the additional requirements for controlled goods and the various import/export facilitations can be found here.
Although a full external border will be operational from 1 January 2021, the Government recognises the impact of COVID-19 and will implement the new border controls in three stages in 2021 (January, April and July) with the requirements differing depending whether the goods to be imported are standard or controlled goods. The April 2021 changes only apply to certain controlled goods.
Steps to take in time for January 2021
- Apply for a GB EORI number – required for all businesses moving goods in and out of GB: You can apply for a GB EORI number here.
- Get a customs intermediary – customs declarations are complex so an intermediary can help. You can find a customs intermediary here.
- Standard or controlled goods – identify whether there are any additional requirements for the type of goods being imported/exported. You can check for additional requirements for imported goods here.
- Familiarise yourself with the UK Global Tariff – businesses will need to know the commodity codes of their goods to determine the applicable tariff and any other additional requirements for the goods being moved. Businesses will also need to consider the applicable duty if importing in the EU and apply for an EU EORI. You can check for commodity codes and applicable duty here.
- Consider whether there are any facilitations that could help, for example duty deferment, temporary storage, warehousing, processing reliefs
The Core Model
The Core Model covers changes which will affect all goods movements. There are additional requirements for specific goods (e.g. food). The Core Processes are:
- Customs declarations – importers and exporters will have to complete both GB and EU customs declarations from 1 January 2021 but these can initially be delayed up to 6 months in certain circumstances
- Customs duties – importers will need to ensure that any customs duties applicable to their goods under the new UK Global Tariff are paid
- VAT – this will be charged on imports of goods from the EU. VAT registered importers are able to use postponed accounting and declare this in their UK VAT return. Non-VAT registered importers will have to pay and report VAT in the same way as customs duties. There is a different treatment for consignments less than £135. More information can be found here
- Safety and Security Declarations – these are required from 1 January 2021 for exporters and from 1 July 2021 for importers.
The Core Model from January 2021
From January 2021 to June 2021, traders moving standard goods will be able to submit customs declarations by using existing processes (e.g. a standard declaration) or they can use delayed declarations.
What is a Delayed Declaration?
- Traders must keep a record of the imported goods at the time of entry into GB and follow this with a supplementary declaration within 6 months of import. There is certain information that must be recorded and retained, and this can be found here
- The trader or an intermediary must be authorised for simplified declarations procedures and have a duty deferment account
- Any tariff that is due must be paid with the supplementary declaration
- The delayed declaration option cannot be used for controlled goods, goods from outside the EU or goods not being sold/used in GB.
- Traders have the option to submit a standard declaration from January 2021 (or simplified declaration procedures if they are authorised)
- Traders importing controlled goods must use this process.
What declarations are required for Non-Freight Imports?
- Merchandise in Baggage – traders carrying non-controlled commercial goods in a vehicle or luggage with a value less than £1500 can make a simple online declaration prior to arriving in GB
- Post and parcels – the processes currently in place between GB and the non-EU will apply to movements between the EU and GB.
The Core Model from July 2021
From July 2021, businesses importing from the EU will have to complete (or appoint someone to complete) a customs import declaration. From this point, delayed declarations will no longer be available. There are Simplified Declaration Procedures which have fewer requirements at the border, allowing for a simpler entry and a supplementary declaration up to 4 weeks later (no later than the 4th working day of the following month). A trader, or their representative, must be approved by HMRC to use this. The processes for importation may vary based on the location of entry.
Businesses will also be required to submit Safety and Security Declarations with all imports. These protect GB against threats such as terrorism and trade from illicit goods.
VAT on Imported Goods
From January 2021, VAT registered businesses will be able to account for import VAT on their VAT return. This means it will be declared and reclaimed on the same VAT return (subject to the normal rules regarding the recovery of VAT). Please note this does not apply to goods in consignments not exceeding £135 which is covered in more detail below and here.
Businesses are able to use postponed accounting if:
- The goods imported are for use in the business
- The EORI number (starting ‘GB’) is stated on the customs declaration
- The VAT number of the business is stated on the customs declaration where needed.
Postponed accounting is compulsory for businesses using delayed declarations. Importers that are not registered for VAT will be required to pay import VAT through the customs import process.
Import VAT must be accounted for in the period in which the goods are released into GB.
If no special procedure is being utilised, the VAT should be declared when the goods enter GB. If delayed declarations are used, this will involve calculating the VAT based on the record created when the goods entered GB. Once the delayed declaration is submitted, a statement will be created which will show the import VAT due. If an adjustment is required, this can be done on the next VAT return.
If goods are declared into a customs special procedure, import VAT is accounted for in the VAT return when the goods are released into free circulation.
For excise goods, VAT will be due when they are released for home consumption.
An online monthly statement will be available to download and businesses must keep this in their records. This statement will show the total import VAT postponed in the previous month which needs to be included in the VAT return. This should be reported as follows:
- Box 1 – include the VAT due on imports
- Box 4 – include the VAT to be reclaimed on imports
- Box 7 – include the total net value of imports as shown on the monthly statement
Consignments under £135
For certain imported goods of a value below £135, import VAT will no longer be due at the border. The business selling the goods will be required to register for VAT in the UK and charge VAT at the time of sale.
Where a business sells imported goods under the value of £135 through an online marketplace, it will be the marketplace that is responsible for accounting for VAT. This will also apply to sales to a business unless that business provides a VAT number in which case they can account for VAT under the reverse charge procedure outlined above.
Low value consignment relief will be withdrawn.
Certain goods will have additional requirements, for example undergoing checks at the border and special certifications. These will be introduced in stages. Businesses should check whether any additional requirements exist for the goods being imported or exported to avoid additional delays. The products that fall into these categories are:
- Goods covered by International Conventions/Commitments (e.g. CITES, Rough Diamonds)
- Goods subject to Sanitary and Phytosanitary controls (e.g. animal products, live animals, plants and plant products)
- Goods with Additional Customs Requirements (e.g. excise goods)
- Other Goods including Strategic Exports (e.g. firearms, medicines, bottled water).
For these products the phases are:
- January 2021 – Standard customs declarations are required and there will be physical checks at the point of destination or other approved premises but they will not be required to enter GB via a Border Control Post. Pre-notification and certificates for some goods may be required
- April 2021 – for products not required to attend to the above in January, pre-notification will be required as well as the relevant documentation/certificates. Physical checks will continue to be at the destination
- July 2021 – certain products will need to be presented to Border Control Posts for physical checks and samples.
Exporting Goods to the EU
Businesses sending goods to the EU will have to complete an export declaration. This can be done by an intermediary or a business can do it itself through the National Export System or using commercial software. All exports will require Safety and Security declarations from 1 January 2021. Certain products may require licences or face certain restrictions. The commodity code which is required for exportation purposes should assist in identifying this. Consideration should be given as to whether an EU EORI is required.
The current export requirements for post and parcels will extend to movements from GB to EU.
The EU is introducing changes to the importation of low value goods from July 2021 and further information can be found here.
If you would like to discuss any of the information in this article, please contact our VAT partner Alison Birch.