Exporting goods from GB from January 2021

From 1 January 2021 business who export goods from Great Britain (GB) need to decide which Customs routes they will follow. These rules do not apply to Northern Ireland (NI) as it continues to operate as part of the EU for VAT purposes.

Importing and exporting goods between GB and NI, from February 2023, comes under the Windsor Framework which replaces to contentious Northern Ireland Protocol agreed as part of Brexit.  

All businesses, regardless of the goods exported or the route chosen, will need to do the following:

• Check VAT guidance for what VAT responsibilities will apply.
• Obtain an EORI (Economic Operators Registration and Identification) number. Apply on GOV.UK. This can take between 5 and 10 minutes to complete.
• Businesses trading moving goods to/from NI (but not through to the Republic of Ireland) will require a second EORI number. This will start with XI.
• HMRC has been automatically issuing both types of EORI where it believes it is required.
• Check what import licences or certificates you may need depending on the goods exported (food, livestock etc.).
• Keep records for six years.

The business will need to decide whether it will be responsible for its own declarations or whether it will use a Customs Intermediary (CI) to complete the declarations. The business must provide the CI with the EORI number and any other information required to complete the relevant declarations.

Completing the declarations within the business will mean:

• Training for a member of staff on how to complete the declarations and maybe acquiring specialist software. 
• Registering to use the National Export System (NES) and applying for a CHIEF (Customs Handling of Import and Export Freight) Badge (this is one application). CHIEF is the computerised entry processing system and will be replaced with a new system, the Customs Declaration Service (CDS), within the next two years.
• An export declaration must be completed before export, using NES. This provides a unique reference number (URN).

The processes involved in exporting goods then depends on how the goods will be exported:

Standard Export procedures

• The export declaration URN is required to allow the goods to cross the border. The business must make sure that the EU importer has done all that is needed to ensure the importation, including having an EU EORI, obtaining licences and certificates where required and completing an import declaration.

Transit

• Can be used when goods are moving across multiple territories or if the business would like to complete customs procedures away from the border.
• The business or the CI may apply for 'authorised consignor' status, which allows the goods to start movement (and move into Transit) from an authorised location belonging to the CI or business and not the designated Office of Departure (OD). 
• If completing its own declarations, the business must register for the New Computerised Transit System (NCTS).
• A guarantee must be provided before the movement of goods can start. It should be arranged with a bank or financial institution and must be authorised by HMRC.
• Before export, as well as an export declaration, a Transit declaration must be completed on NCTS. This provides another URN.
• The person moving the goods must have the Transit Accompanying Document (TAD) (required in paper form throughout the journey) provided by the authorised consignor if being used. Alternatively, they must take the URN from NCTS to the OD in return for a TAD.

Goods temporarily being moved out of GB can avoid paying customs and tax if using 'temporary admissions' procedures; either ATA Carnets or the Duplicate List.

Practical issues for tariffs

Rules of origin

• Every commodity has an 8 to 10 digit code under the harmonised tariff system.
• Binding tariff information: using HMRC's check. Once HMRC confirms your tariff it's valid for 3 years.
• The wrong tariff code may cause customs delays and excess duty may be recovered later.

When do Zero tariffs apply?

If exporting goods out of the UK back to the EU, all goods must be sourced in the EU or UK.

• For example: a tin of tomatoes grown in Italy, chopped and packaged in GB, may then be zero tariffed on sale back to EU countries.
• For example: apples grown in Kent and juiced and packaged in GB and sold to the EU

Or, not more than 50% of the item must be sourced from outside the EU.

• For example: a vacuum cleaner motor is built in the UK, its components come 60% from East Asia, it does not qualify for zero tariffs.

Are you falling foul of the minimal processing rule?

The 'percy pigs case', if you are selling out of the EU, you need to add value to the product from the EU to avoid tariffs.

Significant processing adds value.

• For example: Percy Pigs are sweets made & packaged in Germany, sent to UK where they are sold by M & S. There is a problem when M & S distributes these from the Republic of Ireland (ROI). The ROI adds a tariff: the UK has not added any value.

Are you making a Substantial transformation of the product?

• Substantial transformation of products will changes their tariff code.
• E.g. 'Build a Bear' imports dolls, bears, clothing, voice box, growlers and small toys from China & Korea, each of these has its own separate tariff code. The UK toymaker combines and re-packages these to make children's toys, talking dolls, growling bears and dog toys. Transforming them into a different product changes the tariff code.
• Exporting the finished product from the UK into the EU results in double tariff costs. 

Will an EU distribution hub be useful?

• If there is a tariff every time you cross the border, it may be sensible to repurpose warehouse facilities within EU member states in order to avoid a double tariff hit.

VAT

From 1 January 2021 EU countries will be treated the same as non-EU countries. Goods leaving GB for the EU will now be 'exports'.

Basic rule:

• VAT is charged at the local rate of the country in which the goods arrive.
• The 'importer of record' pays the VAT and VAT is recovered if the customer is VAT registered.
• Business to customer (B2C) sales are affected as the customer is hit by duty plus VAT.
• To become an importer of record you will need an agent in the country to which you are exporting.

Zero-rating:

If certain conditions are met, the export of goods can be zero-rated for VAT purposes. Records will need to be kept to prove this. The conditions are:

• Official or commercial evidence to prove the entitlement to zero-rating.
  • Official evidence is evidence the goods cleared export according to HMRC systems, e.g. a goods departure message or entry print-out. 
  • Commercial evidence is evidence of the physical movement of the goods, e.g. waybills or consignment notes.
• The evience must clearly show:
  • the supplier
  • the consignor (if different)
  • the customer
  • an accurate and full description of the goods, including quantities
  • the export destination
  • the mode of transport and route taken for export.
• The goods must be exported from GB (and evidence obtained) within the specified time limits. Depending on the goods exported, this is either three or six months.

If the conditions are not met or there is not sufficient evidence then the supply will be treated as standard rated (if it would normally be standard-rated if supplied in the UK).

Where commercial goods are exported for business use via accompanied baggage or in a small vehicle, zero-rating can onlu be claimed if copy 3 of Form C88/ESS (or equivalent) is endorsed by Customs. This requires using a red channel to present the goods and form to a Border Force officer.

Zero-rated supplies must still be accounted for even though there is no VAT liability.

There will no longer be any requirement to adhere to distance selling regulations. There will no longer be a requirement to verify the VAT status of the recipient.

See International goods and Place of supply: Goods

Northern Ireland

In February 2023, the Windsor Framework was agreed between the UK and the EU, changing some of the regulations surrounding trade in Northern Ireland. Goods moving between GB and NI should now move freely, on the whole, with the use of 'green lanes'. Goods destined for the EU, via NI, will pass through a 'red lane' with further checks imposed.

VAT: Northern Ireland (NI) will continue to operate as part of the EU VAT area and the rules on exporting to the EU will not change. NI is also part of the UK VAT system. VAT must be applied to supplies of goods as it is in the rest of the UK. If the supply of goods is moved through NI to the EU, this will be a zero-rated supply as noted above.

Customs: The Northern Ireland Protocol confirmed that sending goods from GB to NI will not be subject to tariffs, provided it remains in the UK's customs territory. If the goods are at risk of entering the EU then tariffs will be due. To prove that this is not the case, it will be necessary to be authorised for the UK Trader Scheme. Declarations will, however, be required.

Useful guides on this topic

Importing goods into GB from January 2021  
HMRC has issued guidance for importing goods. Is your business ready? Have all of the relevant applications been made in order to continue trading smoothly?

International goods
Special VAT rules apply to goods bought from and sold to non-UK businesses.

Place of supply: Goods
The place of supply (POS) of goods determines whether the supply is within the scope of UK VAT and whether VAT is payable on that supply.

Registering for VAT
When do I need to register for VAT? When do I need to start charging VAT? What penalties might HMRC issue for late notification?

External links

How to export goods from GB into the EU from January 2021