For many people, before the end of the Brexit transition period on December 31, 2020, the UK has made hasty preparations for the start of a new international trade status. From the perspective of value added tax and tariffs, goods trading companies face the biggest changes. These changes are of great importance and have brought organizations that need to deal with “business critical“ risks, not only to minimize the impact on profits, but also to ensure that they can continue to trade with customers and suppliers. There are numerous reports that companies have decided to stop certain sales channels and incur unexpected costs when importing goods into the UK.
In the first months of 2021, the organization mainly responded to the new Brexit rules from a technical and practical perspective. There are several “myths” about how the UK-EU trade agreement will harmonize with the reality of the new procedure, which has caused considerable friction. For example:
increase non-tariff barriers, for example, when goods cross the border between Britain and Europe, companies need to submit import and export declarations. This is a new procedure for many people.
Despite some political headlines, the UK-EU trade agreement is not completely tax-free. Zero tariffs only apply to products originating in the UK or the EU. Products originating from another country may not fall within the scope of the UK-EU Preferential Trade Agreement, which means that they may be subject to positive taxes when they are imported. Similarly, products made in the EU, shipped to the UK for storage, and then shipped separately to another location in the EU are unlikely to meet the zero preferential rate.
How do you know what you don’t know?
The amount of change caused by the UK leaving the European Union varies from company to company. However, organizations generally focus on ensuring that they have taken the minimum steps necessary to ensure that their products can reach their customers after January 1, 2021. It should be remembered that the organization has responded and will continue to respond to the impact of the Covid pandemic in them. Your business. Now that organizations have had several months to adapt to the new Brexit rules, many organizations are entering a period where they have the resources to assess whether their arrangements are optimal.
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From the perspective of importing to the UK, a way to the present So far, assessing the impact of Brexit is reviewing the company’s MSS data. This is a data set provided by HMRC, detailing the exact information that all imported products have reported to HMRC during the period. Obtaining and reviewing this data can be a revelation for companies because organizations “don’t know, they don’t know what.” Brexit has also led to a general surge in imports, often triggered by organizations unfamiliar with the import process, increasing the chances of error. Reviewing the data may reveal accidental imports, incorrect classification codes, or failure to declare preferential origin, which means that duties have been overpaid. Of course, the data may also reveal the error of insufficient tariffs. But the main point is that the data will accurately show what the company has declared to HMRC so far, providing a platform for evaluating whether improvements can be made.
From January 1st, UK importers have an optional delayed import declaration program designed to keep goods in transit, but submit customs declarations within 175 days. The MSS report will not show the details of these imports until the corresponding supplementary declaration is submitted. HMRC now warns importers that failure to submit supplementary declarations within this deadline may result in civil penalties.
As part of the initial response to Brexit, many organizations mapped the existing supply chain and then identified immediate tax changes. In the future, there may be business changes in the supply chain, such as establishing offices in the UK or the EU, opening more warehouse locations and changing the location of imported products. These developments will lead to changes in the tariff and value-added tax requirements that must be administered.
can also operate the existing supply chain in a more tax efficient way. Some companies may want to explore the use of tariff reductions (such as import processing, refund reductions, or customs warehousing) to reduce the cost of import duties. When the goods are not in the country, these are specific support measures that can help facilitate the payment of import taxes. Organizations that temporarily transfer goods to one country for manufacturing / processing before moving to another location will be particularly interested. Crossing customs borders generally results in the payment of import taxes that cannot be recovered, so multiple movements and payments can have a devastating effect on profit margins.
For e-commerce companies, there are also new EU VAT rules to administer, which came into effect on July 1, 2021, which led to a new VAT process and required changes to the VAT registration. There are still several areas of uncertainty in the new rules, and their implementation has proven problematic for some organizations. Introduction to
Since January 1, 2021, the UK has introduced new international business relationships. For many organizations, the trade negotiations between the UK and the EU only ended at the end of December 2020, resulting in a lack of certainty. This means that the first few months of 2021 are mainly spent in a passive situation. Therefore, the organization Has ensured that its products can reach customers. Now that the immediate obstacles have been overcome, organizations are encouraged to review their transactions for hidden costs or costs that can be eliminated or improved through IVA.