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UK updates EU-GB Border Operating Model – VAT implications

  • Oct 8, 2020 | Richard Asquith

The UK government has updated its Border Operating Model which provides guidance on the rules and processes for customs, VAT and other obligations for the movement of goods between the EU ­­­and Great Britain (UK excluding Northern Ireland).  It covers the planning for businesses, hauliers and passengers should prepare for. A Brexit free trade deal with no goods tariffs or quotas was announced 24 December 2020.

Separate Northern Ireland Brexit VAT and customs measures will apply, and this document does not cover NI-GB-Ireland trade.

There have not been major changes since the first version of the Border Operating Model, issued in July. It is mostly further details on processes and sites for inspections. It adds important details on delayed customs declarations and liabilities. Plus the new Smart Freight System for approval of freight in advance of heading to the UK departure port. 

Key VAT points:

  • Reconfirmation of the option for UK VAT registered businesses to use Postponed Accounting deferred VAT on their imports into the UK instead of paying at the border. Non-VAT registered importers have the same options available to report and pay import VAT as they do for customs duties.
  • Traders who import goods regularly may apply for up to one month’s import VAT payment delay as part of a Duty deferment account. This enables customs charges including customs duty, excise duty, and import VAT to be paid once a month through Direct Debit instead of being paid on individual consignments. To set up a DDA, traders, or their representatives, apply for a deferment account number (DAN) and will need to be authorised by HMRC, as detailed here. New rules are being introduced which will allow most traders to use duty deferment without a Customs Comprehensive Guarantee (CCG). As part of this, SIVA is a scheme that allows you to reduce the level of financial guarantee required to operate a duty deferment account for VAT purposes. 
  • The Trade Tariff Tool can be used to look up commodity codes, duty and VAT rates. 
  • Following the end of the transition period, UK registered businesses cannot act as the EU exporter, even if they have an EU VAT number. A UK business will need an EU-registered company to act as an exporter or as a representative for them in order to export goods from the EU. 
  • If a GB exporter wishes to clear goods in the EU they may need a fiscal representative. A fiscal representative takes care of administrative obligations, and is a local entity that represents foreign traders for VAT purposes, usually in countries where the traders must VAT register but cannot do so themselves. 
  • Import VAT for UK online ecommerce in 2021 will be levied on all imports of goods valued over £135, excise and C2C goods of any value and gifts above £39 from the EU following the same rates and structures as are applied to RoW imports. 
  • Import VAT for freight will continue to be handled through CHIEF / CDS. 
  • Businesses can use Customs Special Procedures to suspend, reduce or claim relief on the payment of customs duties and VAT under specified conditions. 

Explore more content like this in our Brexit hub

Need help with your UK VAT compliance?

Researching UK VAT legislation is the first step to understanding your VAT compliance needs. Avalara has a range of solutions that can help your business depending on where and how you trade. 

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VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He is part of the European leadership team which won International Tax Review's 2020 Tax Technology Firm of the Year. Richard trained as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.
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