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The Current Position
The UK officially left the EU on 31st January 2020. During 2020 little changed as we were still in the “Transition Period”. However, as of 11pm on 31 December 2020, the transition period ended and the UK entered into a new trading relationship with the EU, under the EU-UK Trade and Cooperation Agreement.
From 1 January 2021, the UK has been considered a 3rd Country who operates a full, external border as an independent nation and is free to strike its own trade deals for buying and selling goods and services around the world.
Regardless of the fact that the UK and the EU have reached a Free Trade Agreement, with the exception of trade from and to Northern Ireland (which is subject to the Northern Ireland Protocol), all goods entering the EU from GB or leaving the EU to go to GB are now subject to customs formalities, effective from 1 January 2021.
Northern Ireland Protocol
In terms of the Northern Ireland Protocol, which came into effect on 1st January 2021 and was designed to avoid a hard border with Ireland whilst ensuring the UK, including Northern Ireland, leaves the EU as a whole, the UK government announced special provisions.
The agility and resilience of businesses across Northern Ireland has never been more apparent. During the first half of 2021, Brexit posed a significant challenge for many in terms of getting to grips with new customs obligations, additional regulatory obligations and changes to VAT for cross-border transactions. Many businesses have embraced the changes and are now focusing on the potential opportunities to thrive in a post Brexit world. For those businesses it was important that they had an understanding of what the implications are for the movement of goods across various customs borders. These include:
*UK Trader Scheme (UKTS)
Regardless of the origin of goods moving from GB to NI, if the goods are deemed “not at risk” of onward movement to the EU, they will not be subject to tariffs on movement into NI (if the relevant UKTS conditions are satisfied). Under the UK Trader Scheme (UKTS), businesses are entitled to declare that goods are “not at risk” of entering the EU and therefore not liable to EU tariffs if they are authorised to use the UKTS and the goods are for sale to, or final use by, end consumers located in the UK (GB & NI).
Businesses must be aware that different rules apply to goods brought into NI from GB which are subject to further processing. Rules in relation to processing are strict. Where businesses import goods for processing (and on the understanding that the businesses’ turnover is in excess of £500k per annum), in order to avail of the UKTS the goods must be being brought into NI for one or more of a small number pre-defined purposes: Food for sale to end consumers in the UK; Construction where the processed goods form a permanent part of a structure that is constructed and located in NI by the importer; Direct provision to the recipient of health or care services by the importer in NI; Not for profit activities in NI, where there is no subsequent sale of the processed good by the importer; The final use of animal feed on premises located in NI by the importer.
The purpose likely to be of most relevance to businesses within the Hospitality, Tourism and Leisure industry is “Food for sale to end consumers within the UK (GB & NI)”. Where the UKTS is utilised it is important that the business has records, systems and controls in place that allows the business to declare and evidence that the goods are not “at risk”. As outlined above, businesses should be able to provide evidence on request from HMRC to confirm that goods were correctly declared as not “at risk”. Examples of evidence might include: commercial receipts/ invoices, purchase orders and delivery receipts. These processes are needed to make sure that tariffs are not paid on trade within the UK and that goods going to Ireland/EU will pay tariffs when they should.
** Waiver Scheme
For many businesses operating in the Hospitality, Tourism and Leisure sector, the Waiver Scheme may prove to be the most appropriate way to mitigate tariffs on the movement of goods from GB to NI. Traders can claim a waiver for duty on goods you bring into Northern Ireland from Great Britain which might otherwise incur ‘at risk’ tariffs if you have not exceeded the relevant allowances at the point your import declaration is submitted. Waivers for duty on goods that would otherwise incur ‘at risk’ tariffs are provided in the form of ‘de minimis aid’ and most businesses can claim up to a maximum of €200k of aid on a rolling basis over 3 tax years (this threshold includes “de minimis” aid unrelated to customs duties).
Businesses will need to ensure that if they utilise this scheme that they monitor the relevant threshold on a continual basis and ensure the £200k threshold has not been exceeded. Where a business opts to use the waiver it will be required to complete and file a customs duty waiver form on a quarterly basis. If this option is pursued, businesses should be aware that the Trader Support Service (TSS) has introduced a new facility through which traders can record and track all the de minimis aid they have claimed both within and outside the TSS portal. Further guidance can be found here. In summary where businesses import goods from GB-NI, it is advised that
- They determine the appropriate commodity code and the tariff that may apply on the movement of the goods into NI.
- If the tariff is greater than nil, consider if they can avail of the UKTS or Waiver Scheme.
- If these options are not available, we would advise that the business confirms the origin of goods with the supplier in GB. If goods are of GB origin, preferential tariffs will apply.
* It is acknowledged that negotiations are on-going between the UK and EU in terms of the NI Protocol. Further easements may be announced, however at the time of publishing, no further detail is available.
Services
In respect of the provision of services, unlike trade in goods, Northern Ireland is on a similar footing to the rest of the UK as it is now deemed as a Third Country when trading in services.
Although there are no customs obligations associated with the supply of services, the VAT implications of the cross-border supply of services needs to be considered. See document below.
This content has been produced on behalf of Tourism NI by PKF-FPM Accountants.