BREXIT - Are we there yet?

Are we there yet?

With a new withdrawal agreement made between the UK Government and the EU are we at the beginning of the end (or at least the end of the beginning)?

The message from UK Government is softening with an attempt to avoid a hard Brexit, by requiring that the Withdrawal Agreement Bill is passed by the 31st October or otherwise reliant on a further extension being granted by the EU and implemented in UK law.

HMRC web pages have changed from “The UK will leave the EU on 31 October” to “the UK could still leave with no deal on 31 October”.

If the government cannot get the Withdrawal Agreement Bill through Parliament by the 31st October, the default legal position is still that UK leaves without a deal but that depends on whether the EU grants an extension to the request made on Saturday evening and which under the “Benn” Act the UK government is obliged to accept automatically if it is until 31st January 2020 or otherwise seek parliamentary approval.

If the EU decides not to offer an extension, then unless the Bill is passed there could still be a hard Brexit. Therefore, HMRC are still making preparations for a no deal and below are some highlights from recent discussions:

• Transitional Simplified Procedure (TSP) traders will still be required to submit Final Supplementary Declarations.
• A new Additional Information Statement “TSP01” is required to differentiate TSP Simplified Frontier, Supplementary and Final Supplementary Declarations from normal CFSP declarations.
• HMRC have announced that 95,000 VAT registered traders not already approved for TSP have been automatically enrolled for TSP. It is our understanding that these EORIs should already be ready to have supplementary declarations submitted on their behalf by any agent.
• Unless anything changes in the meantime, from 24 October 2019, if EMCS traders raise a movement on EMCS to an EU member state with a date of dispatch later than 11pm on 31 October 2019, the movement will be rejected by HMRC.
• Further relaxations relate to temporary storage location, that the requirement to be linked to an inventory linked location is waived until December 2020 and that there will be no pre-authorisation visit, although any post-authorisation audits found to be unsatisfactory may see the approval withdrawn. Although there is no requirement to be inventory linking companies will still need to make sure they retain the necessary records and controls which are already well establish within existing inventory or temporary storage systems. Contact us now if you feel you need such solutions.

Proposed Agreement

The new agreement, if passed, allows for a transition period until the 31st December 2020, whether this is enough time to agree a new trading arrangement or at least a free trade agreement is still to be determined and the proposals regarding the arrangement with Northern Ireland raise a number of questions.

As with the previous version the withdrawal agreement lays provisions on how to treat goods that are in “transit” at the end of the transitional period, generally reliant on evidence that “A movement of goods which has started before the end of the transition period and ends thereafter shall be treated as an intra-Union movement regarding importation and exportation licencing requirements in Union law”. It also allows continued access to European databases and systems for the purposes of a clean finalisation of open movements and processes. Any further access would depend on a future trading agreement.

The Political Declaration mentions the objective that the future trading relationship should be based on a Free Trade Agreement, which whilst with a view to facilitating legitimate trade must be managed through customs procedures and checks to ensure the integrity of both the UK and EU markets. We wait to see how deep the regulatory and customs cooperation will be to create a free trade area with ambitious customs arrangements.

Northern Ireland

One of the most contentious parts of the previous agreement was the backstop and this agreement appears to address that by attempting to keep Northern Ireland within the customs territory of the UK but much closer aligned with the EU single market with controls on regulatory and also EU customs tariffs.

Whilst it is proposed that goods flowing from the UK and Northern Ireland will be free of customs duty unless there is a risk of subsequently being moved into the EU, whether as a finished product or as part of another product following processing.

What goods will be considered to be at risk has still to be decided but only if the goods will not be processed and fulfil some future criteria (based on final destination, nature, value and for example duty differentials between the UK and EU) will they be considered as no risk.

The proposal also makes clear that UCC legislation will apply to Northern Ireland, including the EU Tariff and in such cases additional duties may be due it is interesting to note that any duties collected should remain with the UK treasury and not paid to the EU. However, the UK may:

• reimburse duties
• waived a customs debt
• reimbursed customs duties in respect of goods that can be shown not to have entered the EU
• and compensate companies to offset the impact of the application of UCC legislation.

Will we see an increase need in traders in Northern Ireland requiring bonded warehousing or duty management solutions to ensure they are not disadvantaged? For traders with Northern Ireland operations that have never had the need for such solutions early communication with us to discuss your needs will be vital as 31st December 2020 is not far away especially if you need to integrate your ERP systems.

As well as Customs, the proposal suggest that Northern Ireland will continue to follow both the VAT and Excise directives, so could this mean EMCS movements from UK to Northern Ireland on the UK EMCS domain and Northern Ireland to Ireland on the EU EMCS domain or can the UK and EU agree to maintain the current common EMCS platform.

Watch this space as things develop over the next few weeks

Or to read more about the implications of Brexit and how to get your company ready for Brexit visit our Brexit Resource Center.