The Trade and Cooperation Agreement between the UK and EU might have scrapped the tariffs on goods moving across the two parties (subject to RoO), but VAT and Import taxes are still in place.
As the BBC reports (21 Jan 2021):
Under the new rules, anyone in the UK receiving a gift from the EU worth more than £39 may now face a bill for import VAT – with many items charged at 20%.
For goods costing more than £135, customs duties may also apply, which can range from 0% to 25% of the product you’re buying if they have not been paid by the sender already.
The extra charges are usually collected by the courier on behalf of the government, with customers asked to pay before they can pick up their package.
Some specialist European retailers, such as bicycle part firm Dutch Bike Bits and Belgium-based Beer On Web, recently said that they would stop all deliveries to the UK because of the VAT changes, which came into force on 1 January.
Some firms have started charging additional “handling fees” to shoppers to cover costs associated with extra customs checks and paperwork that must be filled out.
Royal Mail, for example, is charging an £8 fee it says “reflects the cost of clearing items through customs and presenting them to Border Force”.
Meanwhile, delivery firm DHL says it is charging UK customers 2.5% of the amount paid to clear customs, with a minimum charge of £11.
Mail and freight company TNT is also adding £4.31 on all shipments from the UK to the EU and vice versa. It has said this reflects the increased investment it has had to make in adjusting its systems to cope with Brexit.
A spokeswoman for Logistics UK told the BBC that the handling fees were “a commercial decision by individual businesses”.
But Michelle Dale, senior manager at accountants UHY Hacker Young, said that new charges could present a major problem for firms in the coming weeks.
“I think what we’ll find is that a lot of trade with the EU from a business-to-customer perspective will come to a stop until some of these rules are eased,” she said.
A government spokesperson said: “The new VAT model ensures goods from EU and non-EU countries are treated in the same way and that UK businesses are not disadvantaged by competition from VAT-free imports.
“The new system also addresses the problem of overseas sellers failing to pay the right amount of VAT when they sell goods in the UK. We anticipate this will bring in £300m in tax every year, to fund essential UK public services.”
VAT and Import Duties are due imports from outside the UK into GB, and from outside the EU into Northern Ireland.
You can find all the VAT relevant information on this webpage: https://www.gov.uk/guidance/vat-imports-acquisitions-and-purchases-from-abroad
Are there any EXEMPTIONS or any way in which the cost can be reduced?
The answer is yes, through Duty Relief Schemes.
There are a variety of such schemes that you might benefit from, depending on a number of criteria: the country of origin of the goods, the typology of goods and the reason for which the goods are being imported.
The main duty relief scheme is the GSP scheme. “The GSP (Generalised System of Preferences) scheme is an EU directive that allows for products being purchased from suppliers in certain countries to be lower-rated or even free from duty. This scheme is in place to allow businesses in developing countries to trade on a wider scale internationally.”
GSP Duty Relief schemes are also known as “trade preferences”; this means you’re allowed to claim duty relief because there is a Free Trade Agreement with the origin country.
To find out if you can benefit from one, the easiest way is to check your product’s commodity code in the UK trade tariff. Under each product’s details, you should be able to see whether it’s eligible for any duty relief schemes and the terms of each scheme.
Below are some of the main of the duty relief schemes available:
Temporary admission; when you bring goods into the UK for designated, short-term use. (For example, an exhibition.)
Inward processing; when you’re importing goods from outside of the EU to process then export (either to outside the EU or within the EU) you can claim duty relief.
Outward processing; this allows you to export your goods to another (non-EU) country for repair or processing and then bring them back into the UK with full or partial duty relief.
Customs warehousing; customs warehouses allow you to store goods duty and VAT free until they leave the warehouse.
Community system of duty relief; if you’re importing products “for educational, scientific or cultural purposes; to encourage trade (for example, goods for test and commercial samples); for other purposes, for example: awards and decorations, when inherited, received as private gifts” (source: HMRC) you can claim duty and VAT back.
Duty suspensions and tariff quotas for raw materials, parts and unfinished products; if you’re importing goods to finish or use as materials in the UK (goods/materials that are unable to be bought or bought in sufficient quantities from within the EU) you can claim duty relief. The criteria that determine the eligibility for these duty relief schemes and the level of savings associated with them are:
– the type of goods
– the country the goods are being exported to
– the country the goods come from (as set by the ‘rules of origin’!)
To claim a trade preference you need to:br – insert the correct commodity code for your goods
– ensure your goods comply with the rules of origin
– be able to provide evidence of where your goods came from
– ensure you comply with transport rules
It is worth doing a bit of research to verify whether your goods are eligible for a Duty Relief scheme, and applying for it, as the financial savings for your business would be considerable.