The UK-EU Trade and Cooperation Agreement (TCA) came into effect on 1 January 2021 so how have the rules for exporting to the EU changed?
Zero tariffs and quotas on goods
The UK and the EU agreed to zero tariff and zero quota trade on goods, meaning that businesses will not face costly tariffs. However, to qualify for tariff-free access, firms will need to ensure goods meet Rules of Origin requirements as set out in the treaty, ensuring these goods meet the ‘local’ qualification criteria.
Rules of Origin
Access to the zero tariffs and quotas will depend on whether the goods meet the Rules of Origin required in the agreement to qualify as ‘local’. Businesses will have to identify the full origin of their goods as well as provide additional paperwork in order to qualify. However, the EU and UK have jointly agreed additional flexibility in collecting documentary evidence to prove origin during the first year, to allow them to benefit from the preferences despite the little time available between conclusion and application of the agreement. Further detail on this flexibility will be published imminently.
Customs and trade facilitation
- The agreement will require customs declarations and paperwork for businesses to process the movement of goods. It does provide for mutual recognition of the Authorised Economic Operator Safety & Security scheme, allowing for streamlined customs procedures for traders already registered.
- Sanitary and phytosanitary (SPS) border checks will be required for trade of live animals and products of animal origin, meaning that agri-food traders will meet with extra costs and burden.
- The agreement only provides limited scope for mutual recognition of conformity assessments. This means that with the exception of a few instances, goods will have to undergo two sets of conformity assessments rather than one if a business is seeking to place a product on both the UK and EU markets, thereby creating additional costs and complexity for businesses.
- However, in specific sectors such as medicines, automotive, organics, wine, and chemicals, the UK and the EU have agreed to streamline conformity assessments
What impact could the changes to exporting rules have on business?
The additional customs checks at the EU border have the potential to cause delays at ports if processes fail or are not followed correctly by transporters. These delays will have knock-on impacts on supply chains – and are difficult for perishable products in particular – with all products of animal origins and plants having to enter the EU via a point of entry with a Border Inspection Post.
As of 1 January 2021, when it comes to exporting goods to EU countries, the VAT situation also changed. Exports to EU countries are treated like those to non-EU countries, which is to say, they should be zero-rated for UK VAT.
This will apply regardless of whether you’re exporting goods to a consumer (B2C), or to a business (B2B). In other words, there’s no longer any need to observe distance selling regulations, or to verify the VAT status of the recipient business.
This could mean businesses selling B2C to the EU need to register for EU VAT and appoint fiscal representatives depending on the requirements of the countries in which they sell.
It’s important to understand what it means to zero-rate goods for VAT.
It doesn’t mean you can simply forget about VAT. It means you apply a 0% VAT rate. No UK VAT is payable but you still have to include the exports as part of your VAT accounting and consider any requirements for VAT in the recipient country.
Note that Northern Ireland remains part of the EU customs and VAT regime when it comes to trade with the Republic of Ireland and the rest of the EU.
You’ll need a UK EORI number beginning with GB or XI to export goods out of the UK. But you’ll also need to know the EU EORI number for the European business you’re exporting to.
If it hasn’t got one, it will need to apply for one in its own country.
You should contact all the businesses you export to in the EU to ensure they have an appropriate EORI number.
If you’re moving goods to your own warehouse in the EU, you’ll need your own EU EORI number.
SRC-Time are one of the South East’s leading accountancy firms in advising the self-employed and partnerships in all aspects of their tax affairs and we are able to assist in any issue raised above.
Our expert team is available to provide you with advice and can be contacted on 01273 326 556 or you can drop us an email at email@example.com or speak with an account manager to get any process started.