The UK Parliament is currently debating a bill that could greatly impact how businesses in the UK handle cross-border supplies of goods post-Brexit. The bill, titled Taxation (Cross-Border Trade) Bill 2017-19, had it's second reading in front of the House of Commons on January 8, 2018, and is now open for further debate. The primary purpose of the bill is to create a customs regime, which would apply following Brexit, to account for the import VAT that would become due upon goods crossing the border into the UK. Under the current language of the bill, for goods that are intended to enter free circulation in the UK, a customs declaration will be required by the importer of record. The person in whose name the declaration is made is the person liable to pay the import duty with respect to those goods; this means that the importer of record will be liable for the VAT on the goods. Upon acceptance by HMRC of this declaration, import VAT will become due immediately, which is a shift from the current system of goods entering the UK.
These changes proposed under this bill would create a cash-flow disadvantage for the designated Importer of Record, as VAT would be required to be paid immediately upon receiving notice from HMRC that the customs declaration has been accepted. The import duty would need to be paid before the goods were discharged from this new customs regime. This bill, as written, does not provide for any special import schemes, such as deferred payments; however, there is language in the bill that allows HMRC to create regulations specifying special scenarios for importation, including allowances for arrangements with countries or territories outside the UK. As the bill continues to move through Parliament, Sovos will closely monitor how this post-Brexit shift would impact our clients in the UK, and will continue to publish updates on this new customs regime.
For further details, including the official text of the Bill, as it is currently published by Parliament, click here.
About the Author
Katie Smethurst is a Junior Regulatory Counsel at Sovos. Within Sovos’ Regulatory Counsel function, Katie focuses primarily on international and U.S. based indirect tax research and analysis. Katie is a member of the Massachusetts and New Hampshire Bars, earned her B.A. from Roger Williams University and earned her J.D. from Suffolk University Law School.More Content by Kaitlyn Smethurst