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Planning for a possible No-Deal Brexit

VAT & Customs

VAT & Customs

"No Deal" issues & actions required now

1. Impact on supply chain

In the event of a No Deal Brexit there will be an impact on supply chains from both a tariff (Duty) and non tariff perspective (potential delays, customs clearance requirements, additional checks on goods e.g. food/animals etc).

Action required now

"Review supply chain"

It is essential for Businesses to review their supply chains to understand the movement of goods into and out of the UK and the potential for disruption to supply chains caused by Brexit and consider actions to mitigate this disruption. The review should be undertaken from both a tariff and non tariff perspective.

2. Customs clearance

In the event of a No Deal Brexit, customs declarations will be required to move goods from Ireland to the UK and vice versa. Both “import” and “export” declarations will be required.

Action required now

“Obtain an EORI number”

To operate within a customs regime, importers of goods need to be customs registered. If not already registered, an application should be filed with Revenue via Revenue’s Online Service (ROS) for an EORI (Customs) number.

“Engage with a customs clearance agent/broker”

Most declarations are filed by customs agents/brokers on behalf of traders. Business should engage with agents/brokers and agree a “pricing schedule” for filing declarations. 

3. Customs Duty impact

In the event of a No Deal Brexit Customs Duty will apply to the import of many goods from the UK into Ireland and vice versa. Unlike VAT which is recoverable by many businesses Customs Duty is not recoverable and will represent an additional cost of import.

Action required now

“Collate and assign tariff classification codes”

The rate of Duty arising on goods depends on the classification of the particular goods and all goods should have an assigned commodity code. Business should collate and confirm commodity codes for all goods imported from the UK to Ireland and vice versa. These codes will be needed in Customs declarations and will drive the Duty arising on the import of goods. Incorrectly classifying goods can lead to a Customs Duty (and related to this a VAT) underpayment. The commodity code will also indicate whether there are any reliefs from Duty applying and any licencing requirements.

“Valuation”

Business should determine the Customs valuation of their imports as this will drive the Duty and in turn VAT cost associated with the import of goods. There are specific rules which apply for valuing the import of goods for Customs purposes.

“Origin”

Business should also document the origin of goods which is required for filing customs declarations and determining, for example, whether additional duties could apply or reliefs could be available. There are specific rules for determining the origin of goods for customs purposes.

4. Import VAT cost

In the event of a No Deal Brexit standard rate VAT (currently 23% for ROI) will apply to the import of many goods from the UK into Ireland and will be payable at the time of import of the goods into Ireland unless reliefs apply.

In the event of a No Deal Brexit, VAT (currently at a rate of 20% in the UK) will apply to the import of goods from the EU and will be payable at the time of import of the goods unless reliefs apply.

Action required now

“Quantify the potential VAT cash flow impact”

Business should quantify the potential cash flow impact of a No Deal Brexit and explore options to manage the impact such as setting up a VAT and Duty payment deferment account, as discussed in more detail below.

5. Import VAT and Duty impact

Action required now

“Deferment account”

To assist in mitigating the impact of a No Deal Brexit businesses can apply to Revenue for a VAT and Duty deferment account so that the payment of VAT and Duty can be deferred to the 15th day of the month following the month of import of the goods. The lead in time to obtain such approval can be at least two months.

“Use of Customs reliefs”

There are certain customs reliefs which can defer the payment of import VAT and Duty on goods brought into Ireland from the UK (and vice versa) or facilitate the processing of goods in Ireland which are to return to the UK post processing without a Duty cost arising. Businesses should explore the extent to which available customs reliefs such as inward processing relief, Customs warehousing or procedures such as transit could assist in mitigating the potential impact of a No Deal Brexit.

“Contracts and Incoterms”

Business should review their contracts with suppliers and customers and especially Incoterms. Incoterms or trade terms inform parties what to do with respect to the carriage of goods from buyer to seller, and who is responsible for export & import clearance and payment of VAT and Duties. They also explain the division of costs and risks between the parties.

“Impact on ERP/finance system”

Businesses should assess what changes may be required to their ERP (Enterprise Resource Planning) or finance systems to cater for a changed VAT and Customs Duty accounting regime in a No Deal Brexit scenario

6. Non tariff costs

Action required now

“Authorised Economic Operator “

Authorised Economic Operator (“AEO”) or, sometimes referred to as, trusted trader status can assist in obtaining priority clearance and mitigate the risk of border delays. Businesses should consider whether AEO could assist in mitigating the non-tariff impact of Brexit. This involves an application to the Irish Revenue and the lead in time to obtain AEO status can be six to twelve months.