If you are a UK business selling goods to the EU post-Brexit, you will no doubt have experienced delays, VAT headaches and an influx of new paperwork over the last few months.
Misinformation and outdated guidance have made the new rules difficult to navigate, causing many companies to abandon returns policies or pause sales to the EU altogether.
Brexit trade rules will affect every business differently, but here is an overview of what you will need to be aware of when selling goods to the EU post-Brexit.
When did the new rules come into place?
Although the UK left the EU on 31 January 2020, trade rules were unchanged during the 12 month Brexit transition period, ending on 1st January 2021. Negotiations around post-Brexit trade were ongoing during this period, being finally concluded on 24 December 2020 with a new EU-UK trade agreement.
While most of the new rules came into force from the start of the year, low-value consignment relief - on consignments valued at less than €22 – has been extended from January 2021 to July 2021, due to the disruption of COVID-19.
What has changed for UK businesses?
The EU-UK trade agreement guaranteed that no tariffs would be introduced. This is good news for British businesses trading in the EU, since tariffs could have substantially inflated the cost of goods. A rise in costs might have resulted in a drop in UK exports and influx of EU goods into the UK market, competing with British brands in their home turf.
What has changed for EU-UK trading is the addition of new paperwork and inspections that must now be carried out on any goods entering the EU from Great Britain. These include new safety certification, checks on food and drink, and customs declarations. Rules for Northern Ireland are slightly different, as explained below.
Customs paperwork
The paperwork now needed to pass through customs is far lengthier than before. The details are non-negotiable, however, and errors or missing information can lead to additional charges and shipping delays - which ultimately risks resulting in unhappy customers.
When sending goods to the EU post-Brexit, every shipment will require the following:
The customs form you use will depend on your courier. DHL, Fedex and UPS use an EDI form, whilst Royal Mail and DPD use either a CN22 (for a value up to £270) or a CN23 form (for a value exceeding £270).
Consignments valuing over £270 require additional paperwork, such as any relevant certificates or licences, and a commercial invoice. Certain countries accept electronic commercial invoices, whilst others do not.
What is an EORI number?
An Economic Operators Registration and Identification (EORI) number is a unique identification code, assigned by the EU, to register and track customs information within the European Union. Anyone wishing to sell goods to the EU – even sole traders - needs an EORI number in order to make customs declarations.
It is easy to apply for an EORI number on the government portal - https://www.gov.uk/eori - and once you have one this can be used for any EU country that you trade with. Your EORI number will start with the letters GB if you are located in Great Britain.
VAT
Following the Brexit trade deal, goods that are shipped from the UK to customers in EU are treated as exports. They are therefore zero-rated for VAT purposes, meaning that UK VAT is not charged at the point of sale. Instead, VAT is charged in the customer’s country, so local VAT rules apply.
EU import VAT is different from country to country, so this is far more complicated for UK businesses used to selling to the EU pre-Brexit. The amount payable will depend on your type of business, the value of the item being shipped, and its country of origin. Therefore, it is always advisable to obtain official tax advice, to ensure you are fulfilling your legal requirements and charging the appropriate VAT.
As mentioned above, the pre-existing low-value consignment relief will continue to be in effect until June 2021. This means that no VAT or duty will be paid on low-value items sold to the EU during this period. For consignments worth over €22, VAT and duty still apply, and after July 2021, they will apply to all consignments, including low-value shipments.
How should I pay VAT?
As a UK business shipping to the EU you have two options of how to collect the EU import VAT:
a. Delivered Duty Unpaid (DDU) – You list the price of your item without VAT. The import VAT is then charged directly to the customer when they receive your shipment as a separate invoice. Whilst this avoids the need to calculate country specific VAT rates as a seller, it can lead to shipment delays or the customer refusing to pay an additional fee, and the consignment being returned to you.
b. Delivered Duty Paid (DDP) – You list the price of your item with the EU import VAT included. This means your pricing will be higher and will vary depending on the country of the customer, but the VAT will be paid upfront and you can pass it on to the courier to be paid at customs, simplifying the shipping process.
Either way, you will need to verify whether you need to register for tax in the countries that you operate in.
What is different for Northern Ireland?
Northern Ireland is being treated slightly differently to Great Britain. Your EORI number will start with XI instead of GB, and no additional charges or duties apply on shipments made to the Republic of Ireland, since the shipment is treated as “intra-community”.
Shipments between Northern Ireland and Great Britain are still treated as domestic shipments, but they do now require customs information.
UK business selling goods to the EU post-Brexit
The new conditions and additional paperwork can feel very daunting for UK businesses trading with the EU. However, as businesses and customers alike become accustomed to the regulations and systems, the initial disruption will hopefully soon be alleviated. In the short term, it is wise to seek professional guidance, and ensure that you are thorough in your paperwork to avoid any problems or delays with your shipments.
The contents of this article do not constitute legal advice and are provided for general information purposes only.
The contents of this article do not constitute legal advice and are provided for general information purposes only.
The Legal Stop offers legal and business document templates and fixed fee legal services and for private and commercial clients. We have made it our mission to provide legal services that are accessible and transparent, offering relevant and practical solutions to our clients.
You can find more details on our range of services below:
Expertise: Legal Editor
Catherine is our legal editor, she writes website and blog content for a range of industries including legal, business and retail. Having graduated from Exeter University with a degree in French and Spanish, Catherine spent some time working abroad before returning to Devon. She now juggles a writing career that she loves with bringing up two young children and exploring the Devon and Cornish coastline.