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Brexit Issue(s) Action required
“Impact on supply chain”
A No Deal Brexit will impact on supply chains from both a tariff (Customs Duty) and non-tariff perspective (potential delays, customs clearance requirements, additional checks on goods e.g. food/animals etc).
“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 potential disruption. The review should be undertaken from both a tariff and non-tariff perspective.

“Customs clearance”
A No Deal Brexit would result in:

 

  • Irish export and UK import customs declarations will be required to move goods from Ireland to the UK*
    *The UK has indicated that no import customs declarations would be required in respect of imports of goods into NI from Ireland for a temporary period
  • Irish import and UK export customs declarations being required to move goods from the UK to Ireland

“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 Irish EORI (Customs) number to import or export goods to / from Ireland.

Likewise, to import or export goods to / from the UK, a similar application should be made via HMRC’s online service for a UK EORI number (unless already VAT registered in the UK in which case your business may automatically receive a UK EORI – see “UK auto-enrolment” below).

“UK auto-enrolment”
HMRC have recently rolled out an automatic enrolment for certain UK VAT registered businesses that have not already applied for a UK EORI number (HMRC have indicated that auto-enrolment may not apply to all of a businesses group companies that may require an EORI number, for example, companies in a VAT group that have not previously imported goods from outside the EU – such companies will have to make a separate application).

“Customs clearance agent / freight forwarder”
Most declarations are filed by customs agents / freight forwarders on behalf of traders. Businesses should consider how they will file declarations, for instance whether by engaging with agents / freight forwarders or bringing the declaration process “in-house” by training staff and procuring software’.

Make sure you understand the information needed to file Customs declarations and where you will source it.

“Customs Duty impact”
A No Deal Brexit would result in Customs Duty being:

  • Applied to the import of many goods from the UK into Ireland
  • Applied to the import of many goods from Ireland into GB / the UK*

Unlike VAT which is recoverable by many businesses Customs Duty is not recoverable and will represent an additional cost of import.

*For a temporary period the UK will apply revised tariff measures which will result in a large percentage of imports into the UK by value being tariff free.

In addition, for a temporary period Customs Duty will not apply to the import of any goods from Ireland to NI.

“Collate and assign tariff classification codes”
The rate of Customs Duty arising on goods depends on the classification of the particular goods and all goods should have an assigned commodity code. Businesses 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 determine the Duty arising on the import of goods. Incorrectly classifying goods can lead to a Customs Duty (and related to this a VAT) underpayment or overpayment. The commodity code will also indicate whether there are any reliefs from Duty applying and any licencing requirements.

“Valuation”
Businesses should determine the Customs valuation of their imports as this will determine 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. The main method is based on the transaction value, i.e. the price actually paid plus insurance and freight. However, there may be other factors which adjust this, including where there is no sale prior to import or the transaction is between related parties. It is important the correct methodology is used to avoid an under or over declaration of duty and VAT.

“Origin”
Business should also document the origin of goods – this 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. For example, goods made in China and shipped from the UK to Ireland would be of Chinese Origin and not UK origin for customs recording and duty assessment purposes.

“VAT Impact”

“Import VAT cost no longer an issue”
Both the UK and the Irish Governments have taken steps to effectively preserve the current VAT position for trading in goods between the UK and Ireland in the event of a No Deal Brexit – both will apply postponed VAT accounting to the import of goods by traders VAT registered in Ireland and the UK. In the case of Ireland this will apply to the import of goods from all non-EU jurisdictions. In the case of the UK, it will apply to imports of goods from all jurisdictions.

“Other VAT issues“
Businesses should assess if any additional VAT considerations will arise from their movement of goods post Brexit, e.g. additional VAT registration requirements . For example, if an Irish business imports goods into the UK as declarant it will be required to charge UK VAT (at the appropriate rate) on its sales in the UK (and vice versa for UK companies selling into Ireland).

“VAT and Duty impact management”

“Customs Duty Deferment account”
To assist in mitigating the impact of Brexit businesses importing goods into Ireland can apply to Revenue for a Customs Duty deferment account so that the payment of Customs 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.

Businesses importing goods into NI / the UK should consider whether a UK deferment account would be beneficial to them. While the UK government has said that no tariffs will be applied to the import of most goods for a 12 month period in the event of a No Deal Brexit, tariffs will apply in certain sectors, e.g. Agri-foods. For businesses that only import goods into NI from the Republic of Ireland (including Agri-foods), the UK government has said that no tariffs will apply for a temporary period. A UK deferment account would not immediately be beneficial to such businesses, though they should continue to monitor this position.

“Use of Customs and VAT reliefs”
There are certain customs reliefs which can defer and / or mitigate the incidence of the payment of import VAT and Customs 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 Customs 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”
Businesses should assess whether the terms (especially Incoterms) of their contracts with suppliers and customers meet their needs post Brexit. Does the contract make clear who is responsible for customs clearance and any duties? Incoterms are international trade terms that 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 Customs 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 Finance / ERP (Enterprise Resource Planning) systems in anticipation of a changed VAT and Customs Duty accounting regime post Brexit.

“Non tariff costs” “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 some of the non-tariff impact of Brexit. This involves an application to either the Irish Revenue or UK HMRC and the lead in time to obtain AEO status can be a minimum of three to six months.

Brexit Customs & VAT Checklist

Are you prepared?

  1. Understand the potential impact on your supply chain
    Ensure you have reviewed your supply chain to understand the potential impact of a customs and VAT frontier on the movement of your goods. Ensure hauliers and freight forwarders are prepared with the relevant permits and registrations.
  2. Have you tried our Customs impact assessment tool?
    KPMG has developed a tool which can assess your customs exposures. Using our tool, our team can produce a bespoke report setting out the key Customs Duty and VAT impacts from Brexit based on your actual data from the last 12 months. We can then meet with you to talk through the analysis and identify the key priority areas for your business
  3. Contracts
    Assess whether the terms of your contracts (especially incoterms) with your suppliers and customers meet your needs post Brexit, in particular who is responsible for import clearance and any duties arising. Incoterms are internationally recognised trade terms that define each party’s obligations, costs and risks associated with the delivery of goods from seller to buyer.
  4. Obtain an EORI number
    To operate within a customs regime, importers and exporters 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 if you are importing goods into or exporting goods from Ireland. If you are responsible for importing goods into the UK, or exporting goods from the UK, you will require a separate EORI number which can be obtained from HMRC via the Online Service.
  5. Customs Classification
    The rate of Duty arising on goods depends on their Customs classification. Ensure you have confirmed the commodity codes for all goods moving into and out of the UK and vice versa and you understand the potential tariff implications associated with the movement of your goods.
  6. Filing Customs declarations
    Consider how you will file Customs declarations for your export or import of goods. Most declarations are filed by Customs agents/freight companies on behalf of traders. Depending on your profile, you may prefer to bring the declaration process “in-house”.  Make sure you understand the information needed to file Customs declarations and where you will get it.
  7. Export/import controls
    Understand whether any additional controls will apply to your goods such as licencing requirements, Sanitary and Phytosanitary (SPS) controls or advance notification requirement (e.g. for agri products).
  8. Deferment account/Customs guarantee
    Ensure you have access to a Customs deferment account if you want to defer the payment of Customs duty and VAT 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 and a guarantee is needed.
  9. Use of Customs reliefs/simplifications
    Make sure you are aware of the reliefs and simplifications available such as customs warehousing, inward processing relief, transit which could mitigate the impact of Brexit on your business in Ireland or the UK. A guarantee is often required to avail of some reliefs so apply early.
  10. UK and NI temporary measures
    Consider if any of the temporary Customs relieving measures the UK Government have announced in respect of imports into the UK could assist your business. These measures are designed to reduce the potential for Customs duty and delays at import to arise. Note the special rules the UK government have announced for movements of goods from Ireland to Northern Ireland.
  11. VAT
    Determine if any additional VAT considerations will arise from your movement of goods post Brexit, e.g. additional VAT registration requirements. New VAT measures to be introduced in the event of a hard Brexit should relieve the VAT funding cost of imports for VAT registered businesses in Ireland and the UK. Familiarise yourself with how these rules will operate.
  12. Impact on ERP/finance system
    Assess what changes may be required to you ERP (Enterprise Resource Planning) or finance systems in anticipation of a changed VAT and Customs Duty accounting regime post Brexit.