Brexit import goods into GB from EU; customs and VAT

  • Jan 1, 2021 | Richard Asquith

The UK is now out of the EU Customs Union and VAT regime. This means goods being imported from the EU into the UK, excluding Northern Ireland (‘Great Britain’ or ‘GB’), face new customs declarations, inspection and import VAT obligations. NI has a different VAT and customs Brexit regime. A Brexit free trade deal with no goods tariffs or quotas was announced 24 December 2020.

The guide below provides details of the steps to import goods from the EU into GB from 2021. It covers both the option of deferred UK customs declarations or standard declarations and import VAT. You can review the customs and VAT processes for GB exports to EU.

1. Determine the Importer of Record

If the import includes two parties, and not just one business moving goods between the UK and EU, they need to agree which side will be responsible for the clearance requirements. This includes customs import declarations, import duties or tariffs (if payable) and import VAT. The elected party is known as the Importer of Record.

2. Get a UK EORI

To identify yourself to the UK customs authorities for imports (and exports) you will need an Economic Operator Registration Identification (EORI) number. This must be entered onto all UK customs declarations and similar paperwork. HMRC has already issued these to all UK VAT registered businesses with international trade. Businesses importing goods may now apply to HMRC if they do not already have a number. If you are importing into the UK, you must be a resident business for certain UK Customs issues, including the declarations. You may require an import customs representative if you are not a UK-resident importer. 

3. Check for Import Licence

Certain goods require the importer to obtain a licence or certificate from various UK government departments. This includes animals, plants, agricultural products, medicines, chemicals and weapons.

4. Import VAT obligations

You will need to plan how you wish to settle UK import VAT for the first time to avoid losing it as an unrecoverable cost or getting your goods blocked. There are a number of alternatives:

  • Have your customer pay under Delivered At Place (DAP) Incoterms. However, most B2B customers will not accept this, and B2C consumers will be unlikely to shop with you again if they are hit with an unwelcome VAT bill.
  • Pay at Customs
  • Defer the import VAT payment via Postponed VAT Accounting in your UK VAT registration. 

Whichever route you take, you must ensure you retain evidence of the import VAT paid so you can recover it from HMRC.

5. Do you wish to defer your customs declarations to 1 July 2021?

The UK is permitting importers to defer the completion of customs declarations for most imports until 1 July 2021.

6. Decide how you will complete import declarations

As the Importer of Record, you may complete customs export declarations and processes yourself, or appoint an intermediary:

6.1 Complete your own customs import process6.2 Use customs intermediary

You can purchase commercial declarations software, and it is recommended that you seek training on customs processes.

You must apply to be authorised to submit simplified import declarations for the deferred customs declarations to 1 July 2021.

You must apply for a CHIEFS ‘badge’. This is HRMC’s import online registration system.

The following parties are usually approved by UK's HMRC to represent importers and produce the Simplified Declaration:

  • Freight forwarders
  • Customs agent or broker
  • Fast parcel operators

7. Preferential customs tariff and the rules of origin

Goods moving between the EU and UK can qualify for zero customs duties if they follow the 'rules of origin' framework agreed in the Trade and Cooperation Agreement. This includes obtaining a statement of origin from the exporter or the importer of record applying 'importer knowledge'.

Any goods coming into the UK from non-EU will be subject to UK import tariffs following the no-tariff FTA between the UK and EU. The UK has published its UK Global Tariff which provides levies by product. This will help you understand what payments are due, manage your cashflow and consider passing on the charge to your eventual customer.

8. Apply for a Duty Deferment account

You will need a Duty Deferment account to allow you to postpone duty payments if you do not qualify for the EU-UK zero tariffs (see above) till the end of the month of importation. This is then settled by Direct Debit from your bank account. You may also use this for VAT if you wish to defer – this is an alternative to Postponed VAT Accounting (see above). HMRC is dropping the requirement for a comprehensive guarantee for this to enable more businesses to benefit. Remember, you can use this even if you have a customs intermediary (see above).

9. Ensure your EU exporter is ready

You will need to check that the exporter, if it is not you, from the EU is ready. This includes them having:

  • an EU EORI number;
  • obtained any EU export licences;
  • a statement of origin
  • an invoice;
  • a packing list; and
  • submitted export declarations in the country of the goods' departure. In return, they will receive an Export Accompanying Document (EAD) from the customs authority. This enables the goods to depart.

10. Moving the goods – paperwork and import taxes

If you have deferred the customs declarations, you must first update your own import records ready for when you do complete the declarations (1 July 2021 deadline). Then complete the supplementary declaration – or have your customs intermediary do so. 

HMRC will debit your duty deferment account if tariffs are due after your supplementary declaration has been received. Your VAT can be declared in your VAT return via Postponed VAT Accounting. If you are not UK VAT registered, then you will have to pay the duties to customs before they will release your goods.

Prior to the movement, the EORI number is used with the CFSP EIDR UK registration system for the simplification and deferment of customs declaration and tariff payments. This should automatically include the goods movement in new Goods Vehicle Movement Service (GVMS) service. The GVMS then generates a Goods Movement Reference which the driver will need to board the ferry or Eurostar to GB.

The importer of record into GB completes the final import entry (up to 30 June 2021 option if using CFSP EIDR). Any customs duties are paid via the duties deferment account.

11. Prepare UK Intrastat declarations

The UK requires VAT registered businesses to complete monthly reports on the movement of goods, 'arrivals', into the UK from the EU. These are known as Intrastat. Despite the UK leaving the EU VAT regime, HMRC has indicated that it will still require these submissions on imports (‘Arrivals’) from the EU. Here are annual Intrastat thresholds.

12. Imported sales not exceeding £135

A import VAT regime has been introduced on 1 January 2021 for imports of goods/consignments valued at £135 or less. The UK's HMRC requires ecommerce sellers, or their facilitating marketplaces, to charge VAT at the point of sale on imported goods (consignments) not exceeding £135. This is instead of paying import VAT. At the same time, the existing VAT exemption on parcels not exceeding £15 has been removed. These goods will pass immediately through UK customs if the customs declaration makes clear the sales VAT has been charged at the point-of-sale.

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is the former VP Global Indirect Tax at Avalara
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