Importing goods from the EU into GB from 1 January 2021

This brief guide is meant to be a useful overview which should be appropriate for most SME’s. It is not meant to be an exhaustive summary of every scenario.

There is a LOT of information out there and it is overwhelming.

We wanted to break this down into the key component parts so that you have a good base understanding of the entire process.

Standard Import (full customs declaration)

Get an EORI number issued by the UK if you do not already have one (it starts with GB). It takes five to ten minutes to apply on GOV.UK.

Most importing businesses are likely to use a freight forwarder or a fast parcel operator. They are specialists in international logistics and can arrange the transport of your goods from their point of origin right to your door. Many freight forwarders also offer customs brokerage services, so they will handle everything from collecting the shipment from your supplier to delivering it to your store or warehouse in the UK.

The role of a customs agent is to help set up the customs documents and licenses you may need for importing into the UK. They’ll make sure you have everything you need to clear customs smoothly and can help you avoid delays and possible fines for failing to comply with complex customs requirements.

Speak to your freight forwarder about being your customs agent. Provide all necessary information to enable them to complete supplementary declarations when they are required, including your VAT number and EORI number.

If you don’t already have a customs agent or fast parcel operator, HMRC have collated a list.

UK Global Tariff

Tariffs are taxes charged on the import of goods from foreign countries and are payable once the goods arrive in Great Britain.

From 1 January 2021 the UK will begin to operate its own tariff regime on imports. Use the UK Global Tariff tool to check the tariffs that will apply to goods you import. The existing commodity code system will continue to apply from 1 January 2021 onwards.

Your freight forwarder / customs agent can assist you with this process.

Import VAT

If you are VAT registered, you should use postponed VAT accounting (PVA) to account for your import VAT – detailed notes below.

If you are not VAT registered, you will pay your import VAT with your customs or excise duties.

Intrastat returns

All VAT registered businesses must complete 2 boxes (8 and 9) on their VAT Return showing the total value of any goods supplied to VAT registered customers in EU member states (known as dispatches) and the total value of any goods acquired from VAT registered suppliers in EU member states (known as arrivals).

In addition to this, larger VAT registered businesses must supply further information each month on their trade in goods with EU member states.

The thresholds apply on a calendar year basis and for:

  • arrivals is currently £1.5 million
  • dispatches is currently £250,000

Postponed VAT Accounting (PVA)

Postponed VAT accounting is intended to bring relief to businesses worried about importing goods. It’s fundamentally simple to use and should mean most businesses that currently trade with the EU are unimpacted by Brexit in respect of VAT.

Currently, import VAT is due at the same time as customs duty on goods imported from a non-EU country. This is usually on or soon after the goods arrive at the UK border, on release of the goods into free circulation.

Payment of the customs duty and import VAT is due immediately, (unless you have a duty deferment account). The import VAT can then usually be reclaimed as input tax on the next VAT return upon receipt of a C79 certificate (subject to the normal VAT rules on input tax deduction). This often leads to a cash flow disadvantage for the importer.

From 1 January 2021 VAT registered importers will account for VAT on goods imported for use in their business on their VAT returns – for all imports from the EU and worldwide. This is called postponed VAT accounting (PVA) and will mitigate the cashflow impact of importing. If your business already imports from outside the EU then it will likely see cashflow benefits as it removes the need to pay for the import VAT upfront.

The introduction of PVA will enable importers to account for and recover import VAT as input tax on the same periodic (usually quarterly) VAT return, rather than having to pay it upfront and recover it on a subsequent return using the C79 VAT certificate as evidence of entitlement.

These changes will not affect non-VAT registered importers and individuals who must continue to pay (or defer) import VAT on imported goods at the same time as the customs duty, as they do now.

All UK VAT registered Importers will be eligible to use PVA; no authorisation will be required.

The customs agent will simply make the appropriate entry and provide the importer’s EORI and/or VAT registration number (VRN) on their customs declaration. This process (subject to customs clearance) will allow the goods to enter into free circulation without up-front payment of the import VAT.

The customs declaration will generate an online Monthly Postponed Import VAT Statement (MPIVS) that will be the evidence required to account for and recover the import VAT as input tax on their next VAT return.

The C79 will continue to be produced for those entries where any VAT is paid on importation.

PVA will only be available on declarations where import VAT would ordinarily be due and where goods are being declared to free circulation. Where goods are placed into a customs special procedure, PVA will be available on the declaration that removes them from that special procedure and places the goods into free circulation.

VAT return completion under PVA

The way it works is very similar to the reverse charge mechanism used for EU trade prior to Brexit.

Rather than physically paying import VAT and then reclaiming it on the subsequent VAT return, the VAT is accounted for as input and output VAT on the same return.

The outcome is the same, but the importer has avoided the physical payment.

After the goods have been imported, it will be necessary to account for import VAT on the next VAT return.

The MPIVS will be available to download and keep, which will show the total import VAT postponed for the previous month that should be included on the VAT return.

Due to postponed VAT accounting, there will be changes to how the VAT return should be completed:

  • Box 1 must include the VAT due in the period on imports accounted for through postponed VAT accounting.
  • Box 4 must include the VAT reclaimed in the period on imports accounted for through postponed VAT accounting.
  • Box 7 must include the total value of all imports of goods included on the online monthly statement, excluding any VAT.

These values can’t be manually adjusted in the VAT return boxes under Making Tax Digital (MTD) and must be recorded in the main record-keeping software.