Like it or not, the UK has left the European Union. But no matter how you feel politically, there is some good news here for businesses.
In addition to a few new hurdles, Brexit has created great new opportunities for companies trading in the UK and EU. However, to take advantage of those opportunities, company owners must pay close attention to imminent changes and how they affect the way UK and EU companies trade with one another.
Post-Brexit trading rules come into effect on 1 January 2021, and they’re going to impact all UK limited companies and sole traders that send goods by post or export items to EU countries. These changes include: how you declare goods, making sure you’ve got an EORI number, changes to VAT, and more.
If you own a business in the UK and sell goods in the EU, you’ve got until the end of 2020 to make sure you’re compliant with these regulatory changes.
That’s why we’ve compiled this quick guide to help you understand what changes your business needs to make so that you can keep exporting to the EU in 2021.
Do the new post-Brexit trading rules apply to me?
The UK Government’s changes to how companies export to the EU will impact a lot of businesses trading in the UK. You’ll need to be compliant with these new regulations if you:
- Move goods to an EU country
- Send goods to the EU via post
- Take goods in a vehicle or your luggage to sell in the EU
- Take goods temporarily out of the UK to the EU
If none of that criteria applies to you, then don’t stress. You should be just fine. But if your business does move or sell goods to the EU, the new rules will apply to you.
You may also need to apply to the UK Government for a license. There are special rules around importing and exporting agricultural products, medical devices, chemicals, art, services, technology and more.
You should consult UK Government rules specific to your industry to find out if you need a license to keep selling or sending items to EU countries. If you do need a license or any certificates to trade in the EU after 1 January 2021, you’ll need to ensure that proof of this documentation is travelling with your goods.
How do declare goods when sending them to the EU
From the start of 2021, all companies exporting goods to the EU must make customs declarations.
A customs declaration is a relatively simple form that lists all of the items travelling, their destination, value, and any other relevant information (such as certifications of licensing). These rules already apply to non-EU countries, and so next year’s changes are just an extension of existing procedures.
Your business can either make customs declarations independently, or you can hire your courier, freight company, or a customs agent to do it for you.
If you want to save a bit of money and submit your own declaration, you can do this electronically via the National Export System (NES). But before you can use that system you’ve got to register for the NES.
You’ll need to make a full declaration before the goods you’re sending arrive at the port they’re departing from. It’s important to get this done quickly. If you fail to do this, your goods might get stopped at the border.
There’s also a simplified declaration process you can use under certain conditions.
Making simplified declarations
A simplified declaration is a shorter version of the normal UK declaration form you’d submit through the NES.
You’ve still got to give customs the same amount of information, but you don’t need to provide every single detail right away. Instead, you can send that extra information later as part of a supplementary declaration. This means you can get items out of your warehouse or premises quicker, without providing every single detail about the shipment.
But there are a few exceptions here, too.
You can’t make simplified declarations on goods that are:
- Regulated by the Common Agricultural Policy
- Being exported or removed from a customs warehouse
- Subject to unpaid duty
- Subject to export licensing
- Subject to inward processing
In addition, you can’t use a simplified customs declaration if the products you’re sending need some sort of pre-shipment declaration.
If you don’t tick any of those boxes, you’ll be able to use simplified declarations for sending items to the EU in 2021. All you’ve got to do is register with the NES and be authorised by HMRC.
You don’t need to complete a customs declaration on any products you ship by 31 December 2020, even if they are received after 1 January 2021.
Your business will also need to think harder about packaging and postage in 2021.
The UK Government will be bringing several changes into force from January regarding labelling and marketing standards for products being exported to the EU. That guidance covers a lot of specific products like organic food and drink, poultry, eggs, alcohol, certain oils, animals, fruit, vegetables, and more.
To be on the safe side, you should check new guidance now to make sure you’re compliant with labelling and postage in 2021.
Get an EORI number
From 1 January 2021, your business will need an EORI number to export goods to EU countries. Just like customs declarations, you already need an EORI number to export to non-EU countries.
An Economic Operator Registration and Identification (EORI) number is an identification number regulators use to keep track of different businesses which move goods between countries. If you don’t have an EORI number, it could mean bigger costs and delays if you’re exporting.
You don’t normally need an EORI number if you’re only providing services (such as consulting or writing) to or for EU customers. You also don’t normally need an EORI number if you’re only moving goods from Northern Ireland to the Republic of Ireland.
If you don’t already have an EORI number, you’ll need to have one from 1 January 2021 to export items to the EU. It normally takes about a week to successfully apply for one.
To apply for an EORI number, you’ll need:
- Your VAT number and date of registration
- National Insurance number (if you’re a sole trader)
- Unique Taxpayer Reference (UTR)
- SIC code and business start date
- Government Gateway ID and password
Already have an EORI number? Starting in 2021, your EORI number needs to start with the letters “GB”. If your existing EORI number doesn’t include these letters, you’ve got to apply for a new one by the end of 2020. If your EORI already has “GB” in it, you’re good to go.
How will VAT work post-Brexit?
This is one aspect of trading in a post-Brexit world that could benefit your business. From 1 January 2021, your company will be able to charge customers 0% Value Added Tax (VAT) on most goods exported to the EU.
VAT is a tax that you’ve got to pay on a lot of different goods and services consumed in the UK or within the EU. Goods outside the EU historically haven’t been subject to VAT. But now that the UK is leaving the EU, VAT doesn’t apply to most exports, either.
This is also sometimes referred to as “zero rate” VAT. It means you can charge your EU customers less per transaction because you won’t need to pay VAT to HMRC as part of the sale.
But before you start lowering all of your prices, be sure to read UK Government guidance on this clearly. Although the zero-rating change does apply to a lot of goods and services being offered to EU customers from 2021, there are a few exceptions, too.
You’ll also be expected to provide evidence that you are entitled to use zero-rating VAT. There are also time limits concerning when goods must be physically exported.
For more information on zero-rating and how it will apply to your EU sales in 2021, check out the UK Government website.
Stay up-to-date on Brexit changes
While this is all of the current government guidance available concerning post-Brexit export changes for UK companies, be sure to keep your ear to the ground so that you can stay up-to-date on further developments.
The UK and EU governments are still negotiating new treaties and easier ways to trade. So the way British businesses buy and sell goods or services with EU countries may evolve over the next few months.
But as long as you do everything to make sure your business is prepared for the changes that will come into force on 1 January 2021, you’ll start off the new year fully compliant with Brexit changes and will be ready to do business with customers in the EU.
There might be new hurdles to deal with because of the UK’s EU departure, but there will be some opportunities to expand your customer base, too.
Want to learn more about running a business? Check out our blog for guides on financing your business, how to form a limited company, managing your company remotely, and more.