Despite extended grace periods to soften the blow of Brexit, life outside the EU is now a reality. The impact has varied hugely between sectors, but businesses of all sizes have been confronted with widespread disruption since the start of 2021.
In short, moving goods to and from the EU has become more complex and expensive, with extra paperwork, fees, and logistical planning required from businesses looking to initiate or maintain trade relations overseas.
We know it has been hard for businesses to keep up with the endless reforms that were announced during the transition period. So, we’ve compiled an up-to-date guide on what actions small business owners need to take to keep trading with the EU.
The impact of the Brexit deal
The UK-EU Trade Cooperation Agreement set out that no tariffs or quotas apply to the movement of goods between the UK and the EU. This is good news for companies doing business with the EU, but it doesn't mean they've emerged unscathed. Under the UK-EU trade deal, new customs declarations are required to move goods across the border, VAT rules have changed, and duties may now apply.
Exporting goods outside the UK
If you're looking to export goods to an EU country, follow these steps for preparing your business to send goods outside the UK:
Apply for an EORI number
If your business intends to move goods between England, Wales, or Scotland and the EU, you must apply for an Economic Operators Registration and Identification (EORI) number starting with 'GB'.
To qualify for an EORI number, your business will likely need a registered office or headquarters based in the country you want to import to or export from. If you're not eligible to apply, you can appoint someone to deal with customs on your behalf. In this case, your representative will get the EORI number instead of you.
Submit an export declaration
Businesses must declare goods before their exit from the UK. As this process is very complicated, you may choose to hire a transporter or customs agent to take care of your administrative obligations. If you decide to deal with customs directly, you'll need to apply for access to the Customs Handling of Import and Export Freight (CHIEF) and submit your declaration using compatible software.
Register and pay VAT and duties
VAT rules and rates vary between European countries, so it's vital to check whether you need to register and file for VATin each member state you sell to. VAT-registered businesses can treat sales as zero-rated exports in the UK, but customs duties and taxes may be applied when the goods arrive at customs. These fees are to be paid by the exporter or buyer, depending on the terms of your agreement.
If you're an online seller, you could be eligible for the Import One Stop Shop (IOSS) scheme, which enables businesses to charge VAT at the point of sale, rather than leaving customers with an unexpected bill once the goods are delivered. This can alleviate some of the hassle and costs of collecting VAT by allowing non-EU businesses to register in one member state. However, you'll be required to hire an intermediary to act on your behalf.
Importing goods into the UK
If you're looking to import goods from an EU country, follow these steps for preparing your business to bring goods into the UK:
Apply for an EORI number
As with exporting, if your business is based in the UK and you're looking to move goods into England, Wales, or Scotland from the EU, you'll need to apply for an EORI number starting with "GB".
Submit an import declaration
You must declare all goods arriving from an EU country into the UK. You can either complete an import declaration yourself or hire an official representative to do this for you. As the paperwork is quite complex, using a third party can help to ensure you meet customs requirements.
For goods entering into England, Wales, and Scotland from the EU, it may be possible to delay submitting a declaration by up to six months, providing your goods are moving into free circulation.
Pay or defer VAT and duties
When importing goods from outside the UK, you could be liable for import VAT. However, you can opt to delay paying most duties or tax charges. For example, UK VAT-registered businesses can adopt postponed VAT accounting. This option can significantly boost your cash flow as businesses can declare and recover import VAT on the same VAT Return rather than paying upfront at the border.
Alternatively, you could consider setting up a duty deferment account (DDA) to pay customs and VAT charges for all your consignments via Direct Debit once a month.
Check if you need a licence to import or export
Depending on the type of goods being traded, you might have to obtain certain certificates or licences. The criteria for restricted goods will depend on the country and product type, so you need to identify the specific rules affecting your business.
Products subject to such certificates and licences include:
- Animals, animal products, and high-risk foods
- Plants and plant products
- Agricultural products, including timber
- Controlled drugs and chemicals
- Nuclear materials
You must also comply with any additional paperwork required for customs clearance on both sides of the English Channel, as well as any compulsory inspections.
If you import goods from the EU, you should ensure that your supplier meets the UK’s requirements. Check your supplier is able to export to the UK, meaning they can submit the correct customs declaration in their country and have the necessary licences or certificates to send goods to the UK. Similarly, when exporting to the EU, check that the goods comply with local rules and that the recipient is permitted to import them.
You should discuss these requirements with your clients and suppliers in the EU and agree on how you’ll deal with customs clearance, VAT, certificates, licences, labelling and marketing standards, and any other concerns.
While SMEs face heightened complications post-Brexit, trade opportunities continue to motivate small business owners to overcome the red tape. With the right legal and financial help, there’s no reason to switch off from a global mindset.
About the author
Carla Caroli is a lawyer at LawBite with over 10 years’ international experience in contract negotiation and contract management. Her work is largely involved with the construction, infrastructure, energy and oil and gas sectors.