Know All About Brexit Trade Deals Between UK and EU?

taxes after Brexit

Know All About Brexit Trade Deals Between UK and EU?

On December 31, 2020, the UK completed its transition period and set to leave the EU for good. European Union (Withdrawal) Act 2018 will end after that. How will Brexit trade deals impact the UK is one of the most discussed questions in the masses these days. Especially how it impacts custom and trade is what concerns the business community the most. 

Currently, there are no duties on the import and export of goods between the EU and the UK. But this will change after 31st December.

The UK has been trying hard to work on better trade opportunities, but none of them turned out to be as fruitful.  They aimed to take off the checking restrictions on food items but turns out all the vehicles carrying food from the UK will undergo a security check-in EU as per the Brexit trade deals.

This doesn’t mean no consensus was achieved. EU agreed on electric vehicles and batteries to qualify as tariff-free trade. Most likely, this trade relationship will get better over a period of time.

Businesses trading goods between the EU and the UK will need to pay duties and VAT on the goods. They also need to revisit their contract commitments and restructure the supply chain.

New duties and excise regime will come into place on the movement of the goods between EU countries and the UK. The world trade organization will determine the actual effect of the excise and duties agreed with individual countries.

How the customs duties will work after Brexit?

Common External Tariff (CET) covers the goods coming outside the EU. The UK is introducing UK Global Tariff (UKGT) on all tariffs. This will replace the current CET which impacts the taxes after Brexit.

How is UKGT different from CET?

CET is not bad news at all. If we look at the details of the new regime, the facts will pose a really good picture. There are different outlooks of the UKGT. Taxes after Brexit will take a new shape in the form of UKGT. 

Will taxes go up after Brexit?

 Import taxes after Brexit will also change for all products, but how? If we look at the tariff-free facility of UKGT and compare it to CET, the new regime is offering more. The UKGT will offer reduced tariffs at 5.7% as compared to 7.2% of CET. This means that 47% of the products will be tariff-free as compared to 27% currently.

How the duties will affect pricing after Brexit?

The duties on the goods coming from EU countries into the UK will change big time. You’ll have to pay import duties and tariffs applicable to the goods. The EU which until December 31st is enjoying tariff-free access to the UK markets will have to pay additional duties like other non-EU countries. 

The World Trade Organization will have a huge impact on the new system. The absence of any trade deal between the EU and UK countries means that only 44% of imports from the EU will be tariff-free as compared to 100%. This will hit the pricing.

What is the transition regime of the Brexit Trade Deals?

There will be a transition regime of 6 months for the imports.

  • If you are an import trader, you can defer any paperwork and duty payments until July 2021 under this regime.
  • After July 1st, 2021, the importer will have to make customs declarations on the imported goods from the EU. It means that you will have to pay duties and customs.

HMRC will cancel the arrangements with the businesses having poor compliance records.

VAT on imports

VAT arrangements will remain the same if you want to import goods with a value of up to £135. If you are running a business and dealing with VAT rules on goods coming from non-EU countries, the arrangements will be similar.

For the goods exceeding the value of £135, the UK government is launching postponed VAT accounting. With PVA, you will have to pay VAT but not immediately. you can choose to declare the VAT on your VAT return. This also includes the date on which the goods arrived in the UK. We have also discussed the VAT accounting scheme in detail.

 

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