Section A: Background

Introduction

This is the third edition of the impact assessment that was first published on 4 December 2018. This edition includes the impacts of the customs, VAT and excise regulations laid before Parliament in February, March and September 2019 (under the Taxation (Cross-border Trade) Act 2018 ( TCTA 2018) and the EU Withdrawal Act 2018 ( EUWA 2018)) and adds to the impacts that were published on 25 February 2019.

The government would prefer to leave the EU with a deal and is working in an energetic and determined way to get a better deal. If it is not possible to reach a deal we will leave with no deal and the government is making all necessary preparations to do so.

As part of the preparations, HMRC has written a series of letters (which are published on GOV.UK) to over 145,000 VAT registered businesses that trade only with the EU to advise them on the actions they need to take, and the changes to be aware of, in order to prepare for the UK leaving the EU without a deal. HMRC has published more than 100 pages of cross-government guidance on processes and procedures to assist businesses in their preparation.

This note covers the impact on businesses and individuals of introducing new customs legislation and amendments to existing VAT and excise legislation. It includes 5 sections:

Section A: Background

Section B: Summary of impacts (plus annex)

Section C: Detailed impacts - the cost of submitting customs and safety and security declarations, paying import duty and import VAT and mitigating facilitations

Section D: Regulations with negligible cost or no impact

Section E: Other impacts

The regulations being introduced

The TCTA 2018, which received Royal Assent on 13 September 2018, introduces a number of powers, including the powers to:

impose and regulate the imposition of import duty on goods imported into the UK

make provision in relation to import duty, VAT or Excise Duty in consequence of or connected with the UK’s withdrawal from the EU

These powers are flexible enough to accommodate a range of negotiated outcomes as well as a leaving the without a deal.

Under the TCTA 2018 and the EUWA 2018 the government has introduced regulations that set out the legal framework for a new customs arrangement and makes amendments to existing VAT and excise legislation in the event of the UK leaving the EU without a deal. The impact of the TCTA 2018 is set out in reference to these regulations.

To date, the regulations have been laid in Parliament in 3 main tranches. The first tranche was laid in November 2018, the second in January 2019 and the third at the end of February and beginning of March 2019. This impact assessment also includes the impact of the regulations laid in September 2019.

As the impact of these regulations cuts across customs, VAT and excise, this note explains how businesses and individuals moving goods across the UK-EU border will be impacted by all 3 tax regimes.

In addition to this overarching impact assessment, separate impact assessments have been published for:

VAT and parcels

VAT and services

UK Tariff (which includes goods relieved from any UK Tariff)

This impact assessment covers Customs, VAT and Excise regulations in a no-deal Brexit.

The November 2018 regulations cover:

customs import processes and procedures, including the submission of customs declarations and applying to be an authorised economic operator lodging declarations before goods arrive at specified ports

applying to use a range of facilitations (special procedures)

paying or deferring payment of import duty and import VAT

transit of goods to, through and from the UK

collecting trade statistics

a penalty regime for non-compliance

conditions required to become an approved port

conditions required to become an approved temporary storage facility

customs arrangements between the UK and the Crown Dependencies

checking the validity of UK VAT numbers

The January 2019 regulations cover:

a framework for the export of goods

submitting safety and security declarations

the introduction of postponed accounting for import VAT

registering for an Economic Operator Registration and Identification ( EORI ) number

) number protection of intellectual property rights

requirements to declare cash (above a certain monetary limit) when moved to or from the UK

record keeping requirements for customs purposes

a new civil penalties regime for safety and security obligations and the exportation of goods

amendments to VAT personal reliefs

amendments to the holding movement and duty point legislation for excise goods, and

various miscellaneous amendments and revocations

The February and March 2019 regulations cover:

temporary customs and excise easements to simplify the declaration process for goods coming from the EU

a power to make temporary changes to the customs declaration requirements in certain circumstances via public notice

customs arrangements between the UK and the Crown Dependencies

new VAT data gathering powers to collect information from postal operators

various miscellaneous amendments, including to the customs rules for travellers bringing commercial goods to the UK in their baggage

various revocations

transitional and other arrangements for safety and security declaration requirements for the period after exit

The September 2019 regulations cover:

transitional and other arrangements for safety and security declaration requirements for the period after exit

further temporary customs and excise easements to extend the transitional arrangements after exit

further VAT data gathering powers to specify the type of information that can be collected from postal operators

various technical amendments and transitional provisions

Any subsequent regulations will be added to the final list.

Before EU exit

Goods moving between the UK and other EU member states do so in a customs union which is regulated by EU legislation, including the Union Customs Code ( UCC ). This means UK businesses trading with the rest of the EU are not subject to routine customs controls and import duty is not payable.

Therefore, businesses do not have to submit any customs import or export declarations. However, for VAT purposes, VAT registered businesses have to declare acquisition VAT on their purchases from the EU, which is accounted for through their VAT Return.

Certain goods are subject to Excise Duty. This is charged on the importation and manufacture of alcohol, tobacco and oils. These goods are currently free to move between the UK and the rest of the EU with Excise Duty suspended, subject to certain conditions being met. Alternatively for duty paid excise goods, a declaration is made to the member state of destination and the duty secured before the goods are dispatched.

What happens if the UK leaves the EU without a deal?

If the UK leaves the EU without a deal, the customs, VAT and excise arrangements in place as a result of the UK being part of the EU will no longer apply. The UK would no longer be subject to EU law and new legislation will be needed to replicate the current rules for trade with non-EU countries, ensuring that this also applies to EU trade. VAT and excise legislation will need to be amended to reflect the fact that the UK is no longer part of the EU.

The government has published details on GOV.UK explaining what would happen to customs, VAT and excise procedures in the event of leaving without a deal. See the pages on importing and exporting after Brexit.

Policy objective

The legislation being introduced for customs, VAT and excise ensures that the UK will continue to benefit from a highly automated customs system with a range of simplifications for businesses, with proportionate risk and intelligence-based checks.

As it does now, HMRC will continue to work closely with industry to ensure that its requirements and interventions cause minimal delays and additional burdens for legitimate trade after EU exit.

The intention is to follow the processes in place for trade with non-EU countries as far as possible to prioritise stability as the UK leaves the EU. In most cases, the same rules will apply to goods moving between the UK and the EU that are currently applied to goods imported from and exported to non-EU countries.

However, to facilitate trade, this legislation introduces a series of permanent facilitations and temporary easements that will allow businesses to import and export their goods more easily across the border.

The temporary easements will simplify a number of processes, including the customs and safety and security declarations process, which will help businesses trading only with the EU to meet their customs and excise obligations as they adapt to comply with their new obligations for the first time.

Section B: Summary of impacts

The government would prefer to leave with a deal, but if the UK leaves the EU without a deal, HMRC would commence most of these regulations so that they come into effect on exit. Businesses currently trading within the EU will need to comply with customs procedures, resulting in significant ongoing administrative burdens of having to submit a declaration for import and export procedures and paying import duty and import VAT before goods are entered into free circulation (when all import formalities have been completed and duties paid).

This impact assessment explains these and other costs in more detail such as submitting a safety and security declaration, but also outlines various facilitations and temporary easements that will be available to businesses, in order to simplify the declaration process and/or defer or suspend the payment of tax such as the use of postponed accounting for the payment of import VAT.

The summary of impacts introduced by each set of regulations is set out in Annex A.

Rationale and evidence of analysis

Where data is available, HMRC has calculated the administrative burdens using the Standard Cost Model as the basis for impacting the on-going burdens the regulations will place on businesses. This is an established model that uses an internationally recognised framework, based on data collected externally from businesses and a methodology which produces consistently calculated estimates.

This information is then combined with other data that is available to HMRC and used to calculate the administrative burdens on business of submitting customs declarations.

Where data is limited HMRC has used internal customer insight and information obtained from engaging with stakeholders to develop its assumptions.

This document includes the costs of submitting a customs declaration which will be a core obligation for the movement of goods between the UK and the EU if a deal is not negotiated. All other areas have been explored qualitatively on the basis that they are either optional facilitations or because there is insufficient evidence available to produce accurate costings.

Why publish an overarching impact assessment?

The substantive provisions in relation to the customs, VAT, and excise regimes after EU Exit are introduced through regulations made under the powers in TCTA 2018, EUWA 2018 and other legislation.

Therefore, in order to ensure that the wider impacts on businesses and individuals can be better understood, the impact on businesses and individuals of enacting TCTA 2018 is set out in this overarching impact assessment.

The regulations were introduced in tranches over a number of months. Therefore, HMRC decided to present the impact of the legislation laid as a whole, updating this document accordingly after each tranche of regulations were laid before Parliament.

However, not all impacts will apply to all businesses and individuals, because of the activities they undertake and the way they choose to engage with customs, VAT and excise procedures.

This third edition of the impact assessment provides an explanation of the impacts as they can be best understood at this time.

Section C: Detailed impacts - the cost of submitting customs and safety and security declarations, paying import duty and import VAT and mitigating facilitations and temporary easements

The Customs (Import Duty) (EU Exit) Regulations 2018, the Customs (Export) (EU Exit) Regulations 2019 and the Customs Safety and Security Procedures (EU Exit) Regulations 2019 set out the detail of a new UK customs regime for the importation and exportation of goods between the UK and the rest of the world.

The enabling Acts and resulting regulations set out when and how goods are presented to Customs, the clearance process and the point at which businesses will need to submit customs declarations and safety and security declarations for import and export purposes. The legislation in this section also covers when import duty and import VAT becomes payable and how these can be deferred.

While these obligations already exist for imports and exports to and from countries outside of the EU, there will be a significant new and ongoing administrative burden for businesses moving goods between the UK and the EU. However, for customs, HMRC has also extended to UK/EU trade, a series of facilitations such as the authorised economic operator accreditation, special customs procedures, temporary storage, and transit arrangements which will allow businesses to interact with the customs regime in ways that are simpler, more cost effective, and which may better support the business models of many companies. Additionally, VAT registered businesses will be able to apply postponed accounting to import VAT.

Whilst businesses that choose to utilise these facilitations may incur one-off costs in familiarising themselves with the requirements and applying for them and ongoing costs to maintain them (for example maintaining a customs warehouse or submitting a transit declaration), the benefits that they bring are expected to outweigh these costs and can help to reduce the ongoing burden of complying with the requirement to submit customs declarations and safety and security declarations and the payment of import duty and import VAT.

HMRC has also introduced a number of temporary easements, for example, to simplify the declaration process and remove the requirement to make safety and security declarations for goods coming into the UK from the EU, in order to maintain the flow of goods on Exit Day. These easements will particularly help businesses trading only between the UK and the EU to meet their customs obligations as they adapt to comply with these for the first time.

The high level impacts of enacting TCTA 2018 and each regulation that have a significant cost and benefit are considered below.

1. The Customs (Import Duty) (EU Exit) Regulations 2018 and the Customs (Export) (EU Exit) Regulations 2019

a) The costs of submitting customs declarations for import and export procedures

This Impact Assessment sets out estimates of the administrative burden of completing additional customs declarations on UK-EU trade. These are based on current trade volumes and historic costs of declarations made for trade with the Rest of the World. These are static estimates. They could change materially to the extent that UK-EU trade might involve a different mix of goods, the volume of trade itself changes, or the cost of completing declarations changes over time, for example as participants seek efficiencies in obtaining such declarations.

(i) Movement of goods:

The obligation to submit a customs import declaration is covered in Section 3 of the TCTA 2018, with the obligation to submit an export declaration introduced through the Customs (Export) (EU Exit) Regulations 2019. Both the Customs (Import Duty) (EU Exit) Regulations 2018 and the Customs (Export) (EU Exit) Regulations 2019 give further detail about the declaration process.

A declaration is used to declare the nature, amount and value of goods being brought into and exported out of the UK. For imports, the process is used to apply quota limits and charge import duty and import VAT. The information in the declaration is used to calculate the duty payable. If the UK leaves the EU without a deal, businesses will be required to make declarations for goods imported from the EU. Imports from the EU to the UK will be treated in the same way as imports from non-EU countries.

At the moment, goods being imported into the UK from the EU do not need to be accompanied by a customs declaration. The latest static estimate of the increase in the total number of declarations annually (for both imports and exports) is 215 million (updated to reflect 2017 data) of which a sizable proportion of that will relate to import declarations. This volume is based on analysis of EU Intrastat declarations and VAT data from 2017 trade flows, as well as non-EU trade data. This analysis indicates a higher number of consignments for a similar value of trade than HMRC sees in trade with the rest of the world. This is in line with the fact that HMRC would expect consignments from the geographical region closest to the UK to be generally smaller in value than those from the rest of the world, and more frequent.

As businesses interact with customs in different ways, the costs they incur are different and so costs can vary between £15 and £56 (updated to reflect 2017 data) per declaration. HMRC has used a segmentation approach to look at the new declarations and costs for 5 different groups of businesses, differentiated by their trade volumes and use of intermediaries. The latest static estimate for the annual administrative burden on UK businesses from additional import and export declarations is £7.5 billion (updated to reflect 2017 data), with import declarations accounting for around half of this figure. The £7.5 billion estimates the administrative burden of completing customs declarations for all EU trade in goods movements. This is a static calculation of the burden, if 2017 EU trade flows were treated in the same way as non-EU trade flows and does not take account of any temporary easements which have been introduced to reduce these costs. The detail of these estimates is set out in the table below (figures may not exactly match due to rounding).

No of declarations Import declarations (m) Import declaration cost Source Export declarations (m) Export declaration cost Source High volume large traders - insourced 39 £28 HMRC Research. Based on 1 and three-quarters hours per declaration. Average wage rate £15.60 per hour 14 £17 HMRC Admin Burden Toolkit reports cost of £17 per insourced export declaration High volume large traders - outsourced 33 £56 £40 average charge from survey of freight forwarders. Plus assumed 1 hour per declaration for business to prepare information @ £15.60 per hour 66 £46 £30 average charge from survey of freight forwarders. Plus assumed 1 hour per declaration for business to prepare information @ £15.60 per hour Fast Parcel Operators 22 £20 HMRC assumption 28 £15 HMRC assumption Low volume, small traders – VAT registered 5 £56 Assumption that low volume traders outsource their declarations 4 £46 Assumption that low volume traders outsource their declarations Traders below VAT threshold 3 £56 Assumption that low volume traders outsource their declarations 3 £46 Assumption that low volume traders outsource their declarations TOTAL 102 £3.8bn 114 £3.9bn

Additional administrative costs will also apply to businesses on the EU side of the border because an export declaration from the UK will need to have a corresponding import declaration into the EU and vice versa. Analysis of the trade statistics evidence base, used by the World Bank in compiling their “Doing Business Report” (2017), suggests costs of completing customs declarations are broadly similar in the EU and the UK. HMRC therefore estimates that the static total ongoing administrative burden on UK-EU trade is £15 billion (updated to reflect 2017 data) a year. Considering the costs on both sides of the border is required to understand the impact on UK-EU trade, as costs imposed on UK or EU businesses will have wider implications for supply chains, and therefore for consumers and businesses in either market.

There will be one-off costs to businesses that currently trade only with the EU who will need to familiarise themselves with how to complete customs declarations for the first time. Further training costs will be incurred as businesses upskill themselves and their workforce in the declaration process. To help mitigate the impact, the Government has made available £24m to support training and IT costs for intermediaries and an additional £10m to support the costs of hiring new customs agents.

However, it is estimated that the majority of UK businesses who currently trade with non-EU countries, and therefore already have to comply with customs obligations, use the services of an intermediary or agent (that is, customs broker, freight forwarder, logistics provider) to complete the declaration on their behalf and fulfil their customs obligations.

It is therefore anticipated that many UK businesses currently trading exclusively with the EU – estimated to be in the region of 245,000 (of which 145,000 businesses are above the VAT threshold) – will follow this model and also use intermediaries and agents in order to comply with these new obligations. There may be costs to businesses associated with finding and familiarising themselves with intermediaries’ services. However, the cost of intermediaries completing customs declarations on a business’s behalf is included in the estimates above.

(ii) Movement of goods from roll on roll off ( RoRo ) ports - the import procedure:

Businesses or their representatives will be required to make customs declarations in advance of the goods arriving in the UK at RoRo locations.

In addition to advanced declarations, ferry operators and the Channel Tunnel operator (Eurotunnel) will be required to have a reasonable belief that businesses have satisfied this customs declaration requirement. In order to achieve this ferry operators and Eurotunnel can include the advanced declaration requirement in their terms and conditions of booking. These bookings are taken online and by phone. Operators may need to make minor adjustments to their booking systems and therefore incur a negligible one-off cost (in addition to the cost of submitting a customs declaration for import purposes).

(iii) Movement of goods from RoRo ports - the export procedure:

Under the standard export procedure goods must be made available for examination before leaving the UK. However, applying this requirement to RoRo ports would present a significant new infrastructure requirement and impede the free flow of trade through such routes.

Therefore the standard procedure is modified for goods exiting the UK at RoRo locations to ensure that only certain goods, as notified by HMRC, are required to be made available for examination. HMRC uses the export declaration to decide which goods to examine and the provision will allow goods declared for export permission to either progress as soon as they are submitted, or for the goods to be presented at an inland location if an examination is required.

This procedure is not expected to present any additional administrative costs to businesses beyond those already estimated for the completion of customs declarations for import and export purposes.

(iv) Movement of parcels by Fast Parcels Operators ( FPOs ) into the UK:

HMRC estimates that a proportion of the £7.5 billion administrative burden will be incurred by those making use of FPOs to submit customs declarations for UK-EU parcels. We have assumed that the cost of submitting these declarations will be lower than for other customs declarations. These new customs declarations will mirror the current rules used for parcels imported into the UK from outside the EU. Further details on this can be found in the HMRC impact note for the VAT treatment of low value parcels.

Further impacts are introduced by the Value Added Tax (Postal Packets and Amendment) (EU Exit) Regulations 2018 laid before Parliament on 18 December 2018. These regulations make an overseas supplier who sends parcels to the UK containing goods valued at £135 or less, responsible for paying any import VAT that is due. For more information on the impacts of this regulation, refer to the HMRC impact note for the VAT treatment of low value parcels.

(v) Temporary easements

HMRC recognises the administrative burden of submitting customs declarations and the difficulties that businesses who have previously only traded within the EU may face when interacting with these customs procedures for the first time. As a result, a number of temporary easements (as set out in the regulations at point 6, 7 and 8 of this section) simplify the customs declaration process for a limited period after exit. This involves deferring the point at which a business is required to submit a declaration and pay customs duty to HMRC, subject to meeting certain requirements. These easements will help to temporarily reduce the overall administrative burden of complying with new customs obligations.

b) The ongoing costs associated with paying import duty and import VAT

The payment of import duty must happen before goods are released from customs control and the amount of duty payable is determined by the value of goods multiplied by the duty rate in the UK Tariff. If the UK leaves the EU without a deal it would implement a temporary tariff regime. This would apply for up to 12 months while a full consultation, and review on a permanent approach, is undertaken. Details on the impact of this policy can be found in the Tax Information and Impact Note for the UK Tariff.

The current VAT treatment of EU imports (acquisitions) by a UK business depends on whether that business is registered for VAT:

non-VAT registered businesses are charged VAT by the supplier at the rate applicable in the supplier’s member state – unless the supplier’s UK sales exceed the UKs annual ‘distance selling’ threshold (£70,000), in which case UK VAT is charged, these businesses are unable to reclaim the VAT

VAT registered businesses are not charged VAT by the supplier and instead account for the acquisition VAT on their VAT returns, these businesses can reclaim the on the VAT return, subject to normal rules

If the UK leaves the EU without a deal, all businesses will be required to complete import declarations (with the associated administrative burdens in 1(a) of this section) and pay import duty and import VAT on goods from the EU for the first time.

VAT registered businesses would generally have to pay import VAT at an earlier time than they have to pay acquisition tax now. This would be a significant cash flow impact on those businesses.

To mitigate this the government has introduced The Value Added Tax (Accounting Procedures for Import VAT for VAT Registered Persons and Amendments) (EU Exit) Regulations 2019. These regulations allow VAT registered businesses to account for import VAT (from both EU and non-EU countries) on their VAT returns. This will give VAT registered businesses importing goods from outside the EU a significant cash flow advantage. The regulations at point 3 of this section provide more detail about the positive impact of this measure.

Businesses will be able to pay their import duty in a number of ways. Under the Customs (Import Duty) (EU Exit) Regulations 2019, they can also delay payment of import duty by an average of 30 days by setting up a duty deferment account. HMRC will require the duty to be secured by a bank, insurance company or building society. It’s estimated that over 145,000 VAT registered businesses who currently only trade with the EU, and so are likely to be new to customs procedures, will be impacted and this is in addition to an estimated 100,000 non-VAT registered businesses who also only trade with the EU. The costs (some of which will be one-off and others on going) are likely to include the following:

cost of appointing a customs agent if electing to do so

familiarisation with a new UK Tariff

setting up a payment method

additional record keeping requirements – businesses will need to keep records for at least 6 years and this may require new systems and processes

one-off cost for arranging for a deferral account, unless already approved

ongoing costs of securing a guarantee to take advantage of deferring or suspending the payment of import duty

Under these regulations, businesses that have only previously moved goods to or from the EU will require a guarantee in order to defer or suspend payment of duty. While there will be an ongoing cost in securing a guarantee (from a relevant institution or an intermediary for use of their guarantee facility), businesses will only make that business decision if there are commercial benefits gained in deferring or suspending the payment of import duty which, in this case, would be a significant cash flow benefit.

However, the Customs (Import Duty, Transit and Miscellaneous Amendments) (EU Exit) Regulations 2019 and the Customs and Excise (Miscellaneous Provisions and Amendments) (EU Exit) Regulations 2019 introduce temporary easements which give businesses a period of grace to obtain a guarantee (when applying for a new duty deferment account), as well as relaxing the requirement to use a customs comprehensive guarantee. These easements should help importers access deferred payments more quickly and easily, improving cash flow benefits.

Excise businesses that have only previously imported excise goods from the EU may also need to make arrangements to gain access to a deferment account, but the temporary easements introduced through the Excise Duties (Miscellaneous Amendments) (EU Exit) (No 3) Regulations 2019 and the Excise Duties (Miscellaneous Amendments) (EU Exit) (No 4) Regulations 2019 also provided for HMRC to be able to allow a period of grace for securing a guarantee for imported tobacco products (similar easements can be made for other excise goods under existing powers).

c) The facilitation of applying to be an Authorised Economic Operator ( AEO )

AEO status is an internationally recognised quality mark indicating that an operator’s role in the international supply chain is secure, and that their customs controls and procedures are efficient and compliant. This is a facilitation that offers a range of benefits including access to certain simplified customs processes, reduced requirements for guarantees when deferring import duty, and in some cases the right to ‘fast-track’ shipments through some customs and safety and security procedures.

Businesses can apply to be authorised for ‘customs simplification’ - AEO (C), ‘security and safety’ - AEO (S), or both. The Customs (Import Duty) (EU Exit) Regulations 2018 and Customs (Export Duty) (EU Exit) Regulations 2019 cover AEO (C) while The Customs Safety and Security Procedures (EU Exit) Regulations 2019 set out the rules for AEO (S).

The current benefits of an AEO (C) accreditation in the UK include:

simplified customs processes: easier admittance to customs simplifications, fewer physical controls and the possibility to request the location that HMRC applies customs controls

a 70% reduction in the amount required to be secured when giving a comprehensive guarantee

a notification waiver when making an entry in a declarant’s records, which simplifies the process

The UK scheme is in place and existing AEOs registered in the UK will automatically be carried over and will not be required to re-apply.

Based on European Commission figures from 11 November 2018, there are 271 AEO (C) accreditations in the UK and most of them are from transportation and storage, manufacturing, wholesale and retail sectors. 1 It is difficult to predict, at this time, how many new businesses that only deal with UK-EU trade will seek to apply for this status but it is likely to be businesses from those same sectors. It anticipates that businesses would only apply if the costs of complying with the criteria are outweighed by the benefits of the scheme.

The benefits of applying for AEO status for small and medium enterprises may be modest relative to the cost, but HMRC still predicts significant numbers of these enterprises choosing to incur these costs. It anticipates that the cost of applying for AEO (C) status across all business sectors will lead to a significant one-off cost for traders.

The costs are likely to include the following:

hiring external agents to help with the AEO application process

application process purchasing of additional software to ensure the record keeping is maintained to certain standards

initial familiarisation with procedures and complying with requirements

An AEO application is ultimately a commercial decision which businesses will take if they believe the long term benefits will outweigh the cost of applying, and offset the overall cost of interacting with the customs regime, for example, by making it quicker and easier to access other facilitations.

d) Temporary storage

The Customs (Import Duty) (EU Exit) Regulations 2018, sets out the temporary storage procedure that defers the declaration process and liability to import duty and VAT for up to 90 days on the goods arriving into the UK. When goods are imported into the UK they must be presented to HMRC to verify if they are domestic or chargeable goods.

If the goods are domestic goods then no further action is required. If the goods are chargeable then they are under HMRC control and either a temporary storage declaration or a declaration for a Customs procedure must be made. If a temporary storage declaration is made, the goods are placed into a temporary storage facility and the importer has 90 days (from the date of presentation of the goods) to make a customs declaration. Temporary storage facilities are not routinely operated by HMRC, but by businesses holding an approval to operate them.

This replicates the existing arrangements for imports from non-EU countries but, following exit from the EU, HMRC anticipates an increase in the volume of goods that will be placed into a temporary storage facility, as goods imported from the EU will be subject to customs control.

While there will be a cost if businesses choose to use a temporary storage facility HMRC does not predict that this will be a significant cost. Businesses will only make that business decision if there are commercial benefits gained in deferring the submission of a customs declaration by up to 90 days.

2. The Customs Safety and Security Procedures (EU Exit) Regulations 2019 and the Customs Safety and Security Procedures (EU Exit) (No. 2) Regulations 2019

The main purpose of the Customs Safety and Security Procedures (EU Exit) Regulations 2019 is to enable the UK to continue to meet its safety and security obligations under the World Customs Organisation ( WCO ) Framework of Standards to Secure and Facilitate Global Trade by introducing a new UK regime.

The WCO sets minimum requirements for participating customs administrations to regulate, monitor and secure the international supply chain. Each participating country must ensure that customs authorities gather electronic cargo information at consignment level on both inbound and outbound shipments in advance of these reaching the border, while a risk management approach should be used to detect threats to security and illicit goods.

The UK currently meets these obligations as part of the EU, which means that the consignment information is only captured when goods move across the EU’s external border, therefore only businesses moving goods between the UK and countries outside the EU need to provide this information currently. These regulations extend this obligation to all movements into and out of the UK.

Under these regulations, safety and security information will be provided by the submission of an entry summary declaration ( ENS ) for imports. In relation to exports from the UK, where a customs export declaration is not pre-lodged, a separate exit summary declaration ( EXS ) will be required.

The legal obligation to complete the ENS or EXS lies with the carrier or operator of the means of transport on or in which the goods are brought into or out of the UK (for example hauliers or train, vessel or aircraft operators). A representative or delegated third party may lodge the ENS or EXS but the legal responsibility will always remain with the carrier or operator.

The ENS is submitted into HMRC’s IT system - the Import Control System ( ICS ). Carriers can submit information to ICS through software specifically purchased by traders or through an independent trade system, referred to as a ‘Community Service Provider’, that tracks the movements of goods on behalf of carriers. An ENS is made in addition to a customs declaration for import purposes which is submitted into HMRC’s IT systems - the Customs Handling of Import and Export Freight ( CHIEF ) or the Customs Declaration Service ( CDS ). However, most goods leaving the UK will be covered by a combined export declaration, containing the relevant safety and security information, when this is submitted into CHIEF or CDS . This means that there will be no additional requirement to submit a separate EXS when submitting a customs export declaration and so HMRC does not foresee any additional administrative costs being incurred that are not already included in the cost of submitting a customs declaration. An EXS will only be required where an export declaration has not been pre-lodged, for example on empty containers.

If the UK leaves the EU without a deal, subject to the exceptions set out above, carriers and operators will need to make safety and security declarations for goods moving between the UK and the EU. Whilst many carriers, specifically large economic operators, are experienced in transporting goods to both the EU and non-EU countries, HMRC anticipates that submitting an ENS and, where applicable, an EXS will present a significant ongoing administrative burden for carriers, as it will be a new legal obligation and an additional cost to submitting a customs declaration for import and export purposes.

In practice, HMRC expects the cost of submitting the data required to be passed on by the carrier or the operator to the importer. Carriers will either need to pay a Community Service Provider ( CSP ) per declaration or invest in their own software through which to submit declarations. Depending on the operators’ current experience and capabilities, particularly those operators who have previously only transported goods to the EU, they are likely to incur significant one-off costs in familiarising themselves with the new rules, purchasing software, training staff, setting up systems etc. In addition, many importers do not currently have access to all of the data required to complete a safety and security declaration so there will be an additional burden to them in obtaining this data.

Another aspect of these regulations is to replace or remove terminology so as to enable an AEO (S) facilitation to continue to operate. The benefits of the status are that:

consignments may be subject to less onerous checks through customs control

requirements are reduced for mandatory pre-arrival and pre-departure ENS and EXS

There will be some costs of applying for this status (as set out in point 1C) but an AEO application is ultimately a commercial decision which businesses will take if they believe the long term benefits will outweigh the cost of applying.

In response to feedback from industry and their concerns in being ready to meet these obligations from exit day, a number of temporary easements have been introduced through the Customs Safety and Security Procedures (EU Exit) (No. 2) Regulations 2019. These regulations amend the Customs Safety and Security Procedures (EU Exit) Regulations 2019 and allow HMRC to establish transitional periods during which the ENS and EXS are not required. They will permit the following:

a 12 month transitional period during which there is no requirement to submit an ENS for goods imported from territories where the UK does not currently require these declarations (for example the EU Member States, Norway, Switzerland); and

for goods imported from territories where the UK does not currently require these declarations (for example the EU Member States, Norway, Switzerland); and a 6 month transitional period during which the EXS is not required to be submitted for the movement of empty vehicles, empty containers and pallets to the EU

The 12 and 6 month transitional periods for an ENS and EXS respectively will assist businesses by deferring their administrative costs, as they are given more time to prepare. After the transitional periods, businesses will need to adapt their processes and systems to meet the requirement to make safety and security declarations prior to goods arriving in the UK from the EU ( ENS ) or leaving the UK to the EU ( EXS ). The transitional periods do not apply to territories that are already subject to a requirement to submit an ENS or EXS .

The regulations also give HMRC a discretionary power for a period of 12 months to allow businesses a longer period over which to submit an EXS . The power will only be used if needed. This mirrors the policy for customs export declarations and the specifics will be set out in a public notice.

3. The Value Added Tax (Accounting Procedures for Import VAT for VAT Registered Persons and Amendment) (EU Exit) Regulations 2019

These regulations provide for postponed accounting for import VAT. This means that VAT registered businesses currently trading with the EU will not suffer a cash flow disadvantage in the event of leaving the EU without a deal and businesses trading with the rest of the world will obtain a cash flow benefit.

Currently, import VAT is due on goods imported from outside the EU and is accounted for in the same manner as import duty. Any import VAT or import duty is payable at the time of import but this can be deferred until the 15th day of the month following the duty point subject to certain conditions. Most VAT registered businesses can recover the import VAT they have paid on their VAT return, subject to normal rules, but this may be some time after they have paid it.

VAT is also due on goods imported by businesses from the EU (known as acquisitions). VAT registered businesses receive the goods without payment of VAT and, instead, account for it on their VAT return. As most VAT registered businesses can recover all of the VAT they incur, the 2 amounts included on the VAT return net-off and there is nothing to pay. In comparison to imports from the rest of the world, the EU rules provide a cash flow benefit.

If the UK leaves the EU without a deal all acquisitions from the EU will become imports and subject to import VAT. In the absence of postponed accounting, businesses importing goods from the EU would face a cash flow cost due to the delay in reclaiming the import VAT paid on the VAT return.

With the introduction of these regulations, postponed accounting will be available to VAT registered businesses in respect of their imports whether from EU member states or the rest of the world.

Postponed accounting will preserve the cash flow benefits that previously applied to acquisition VAT and it will also provide a cash flow benefit to businesses which import goods from outside the EU. The non-recurring cash flow benefit to business is estimated to be significant and a facilitation that will considerably mitigate the ongoing administrative burden of paying import VAT as set out in 1(b) of this section.

While there will be a significant cash flow benefit for businesses bringing goods in from the rest of the world, HMRC estimates that there will be a negligible administrative burden for those businesses in completing the entries on the VAT return.

4. The Customs (Special Procedures and Outward Processing) (EU Exit) Regulations 2018

Special customs procedures are available in certain circumstances where goods are imported to the UK to be processed, stored or used for other specified purposes. Declaring goods to a special customs procedure allows businesses to reduce or suspend import duty that would otherwise be due. In addition, there are excise duty and VAT advantages available for goods declared to special customs procedures. Similarly, the outward processing procedure provides import duty advantages when domestic goods that have been sent overseas to be processed return to the UK after the processing.

The procedures dealt with in these regulations and their benefits are:

Customs warehousing (storage procedure) – this allows businesses to hold imported goods in an approved warehouse (either operated by them or another business) with import duty, import VAT and excise duty payments suspended, import duty, import VAT and excise duty may be due when the goods are released from the storage procedure to free circulation or another customs procedure, if goods are exported on their release from the warehouse then import VAT and import and excise duties are not chargeable

Inward processing – this allows businesses to import goods for processing or repair with import duty and import VAT suspended, import duty and VAT may be due when goods are released from the inward processing procedure to free circulation, or another customs procedure - however, if goods are exported after being processed, import VAT and duty are not chargeable

Outward processing - this allows domestic goods to be exported for an approved process and then re-imported, when goods declared to an outward processing procedure return to the UK after processing, the goods can either be treated as domestic goods and relieved of any import duty, excise duty and import VAT or become chargeable to import duty, excise duty and import VAT on the difference in the value of the goods after they have been processed

Authorised use - this enables goods to be imported for a prescribed use (for example, chemicals used in inhalers) at a reduced or nil rate of duty

Temporary admission - this allows specified goods, such as samples, professional equipment or items for auction, exhibition or demonstration, to be temporarily imported into the UK with import duty relief and no import VAT payable

The procedures mentioned above are currently only available for goods imported from outside the EU. When the UK leaves the EU, they will also be available to goods imported to the UK from the EU. We therefore anticipate an increase in the use of these procedures once the UK leaves the EU.

Customs warehousing, inward processing and end use (authorised use) are currently the most frequently used special customs procedures for UK traders currently dealing with non-EU goods, especially for those in wholesale trades and large retailers. Inward processing is also popular with manufacturers of machinery and equipment.

HMRC anticipates increased applications to use these procedures from businesses in these sectors that are currently trading with the EU only. However, it is difficult to estimate how many more businesses will choose to use these procedures. In each case a business will have to weigh up the benefits of becoming authorised to declare goods for the procedure against the cost.

These costs are likely to include the following:

costs associated with applying to HMRC for authorisation to declare goods for the procedure (other than the storage procedure)

familiarisation with the processes businesses using the procedures are required to comply with

for businesses wishing to operate a customs warehouse: acquiring or renting a building, maintaining and staffing it

upscaling of IT systems to allow submission of customs declarations

the use of an intermediary where businesses elect to hire them to meet their customs requirements

These costs may be significant in some cases, but businesses will only incur them if there are import duty and other advantages to them in using the relevant procedure.

5. The Customs Transit Procedures (EU Exit) Regulations 2018

Under a transit procedure, goods can be moved across one or more customs territories without the need to pay import duty until the goods reach their final country of destination. This provides a significant cash flow benefit, and also eases the administrative burden associated with moving goods within or across customs territories. The transit procedures set out in the regulations are:

Common Transit Procedure - The common transit procedure (which implements the Common Transit Convention) enables businesses to move goods between different contracting parties to the Convention under common rules, without having to pay import duty, import VAT and excise duty until the goods reach their final country of destination.

Transports Internationaux Routiers ( TIR ) Transit Procedure - This procedure implements the Customs Convention on the International Transport of Goods allowing goods to be carried across international borders with duty and taxes suspended until the goods reach their final country of destination. A condition of the TIR procedure is that the movement of the goods must include transport by road.

Domestic transit - This procedure allows the suspension of import duty where chargeable goods are moved between two locations in the UK. This may include, for example, movement of goods between different temporary storage facilities or movement to and from a customs warehouse.

The costs of using the above transit procedures could include those associated with:

familiarisation with the rules and requirement of the relevant transit procedure

acquiring new or upscaling existing IT systems to enable submission of customs declarations at the start of the transit journey

agent costs where businesses elect to use them to meet transit requirements

authorisation of new consignee or consignors, where a business chooses to apply for either of these roles (under which they are authorised to perform certain customs functions at the start or end of the transit journey)

the cost of securing a guarantee against the transit liabilities

We anticipate that businesses will only choose to use these transit procedures if the costs of doing so are outweighed by the long-term benefits.

6. The Customs (Import Duty, Transit and Miscellaneous Amendments) (EU Exit) Regulations 2019

If the UK leaves the EU without a deal, the administrative costs of submitting customs declarations and complying with customs procedures will impact all UK business sectors that rely on trade between the UK and the EU. However, these regulations also introduce easements that will temporarily remove or delay some of these administrative costs by making it easier for businesses to comply with their customs obligations and thus giving them time to adapt.

These easements include:

Transitional Simplified Procedures ( TSP ) that will ease the requirements for making a full declaration for goods at the point of import, once businesses have applied and been approved by HMRC to use TSP , importers can provide a simplified frontier declaration when importing their goods, depending on the type of goods being brought into the UK, this declaration is either submitted to HMRC at import (for controlled goods, which will be listed in a public notice), or lodged in the importer’s own records, the importer is then required to make a further declaration of the full import details to HMRC at a later date, if HMRC publishes a notice listing specific locations at which TSP can be used, the use of TSP will be restricted to these locations

) that will ease the requirements for making a full declaration for goods at the point of import, once businesses have applied and been approved by HMRC to use , importers can provide a simplified frontier declaration when importing their goods, depending on the type of goods being brought into the UK, this declaration is either submitted to HMRC at import (for controlled goods, which will be listed in a public notice), or lodged in the importer’s own records, the importer is then required to make a further declaration of the full import details to HMRC at a later date, if HMRC publishes a notice listing specific locations at which can be used, the use of will be restricted to these locations allowing importers who bring goods through RoRo locations additional time to notify HMRC that goods included in a frontier declaration, have arrived, importers will be given until the end of the working day following the crossing to notify HMRC that the goods have arrived in the UK - this notification process will not apply to those importers utilising TSP to lodge a declaration in their records

locations additional time to notify HMRC that goods included in a frontier declaration, have arrived, importers will be given until the end of the working day following the crossing to notify HMRC that the goods have arrived in the UK - this notification process will not apply to those importers utilising to lodge a declaration in their records intermediaries being able to use their own Customs Freight Simplified Procedures ( CFSP ) authorisation to declare goods on behalf of their clients, without having to take on the liability for import duty and VAT - this will enable them to support new clients that are not authorised in their own right, this temporary facilitation allows businesses moving goods through any port or Eurotunnel, to benefit from using an intermediary’s simplified customs declaration authorisation, which allows the deferment of import duty, VAT) or excise duty for a specified period

) authorisation to declare goods on behalf of their clients, without having to take on the liability for import duty and VAT - this will enable them to support new clients that are not authorised in their own right, this temporary facilitation allows businesses moving goods through any port or Eurotunnel, to benefit from using an intermediary’s simplified customs declaration authorisation, which allows the deferment of import duty, VAT) or excise duty for a specified period to obtain a duty deferment account traders will need to obtain a financial guarantee from a financial institution, but these guarantees will now no longer need separate authorisation (Customs Comprehensive Guarantee authorisation) from HMRC

a period of grace to obtain a guarantee when applying for a duty deferment account

allowing, in most cases, importers to operate a temporary storage facility or declare goods to a special customs procedure or outward processing without providing a guarantee

a change to a public notice power under the CTC in order for the UK to comply with accession to CTC , the power provides the point at which documentation is to be presented at a small number of ports in order to confirm that goods have crossed from one customs territory to another

Whilst adopting some of these temporary easements will result in some initial administrative costs, for example, applying for TSP , engaging a customs agent or, in time, obtaining a guarantee, HMRC expects these temporary easements to provide UK businesses that trade with the EU more time to adapt their business models in order to comply with their customs obligations. This will provide longer term benefits that will outweigh the initial cost of adopting them.

It will also allow intermediaries the time to scale up their existing operations to take account of EU trade without having to take on the tax liabilities of previously unknown new clients.

7. The Customs (Managed Transition Procedure) (EU Exit) Regulations 2019

If the UK leaves the EU without a deal, HMRC is designing into its customs processes and procedures temporary easements to help facilitate the flow of goods coming into and out of the UK. As part of the Customs (Import Duty, Transit and Miscellaneous Amendment) (EU Exit) Regulations 2019, businesses who apply to use the TSP will be able to make simplified customs import declarations for goods at all locations. However, given the limited time to prepare, limited capacity of customs agents and specialist knowledge and IT required to make declarations, many businesses may still not be able to comply with the documentation requirements initially.

If considered necessary to ensure the continued flow of goods coming into the UK, these regulations provide that HMRC may issue a public notice which will temporarily permit certain traders, importing or exporting goods at specified locations to make a declaration by conduct for the goods and then submit further information (within a specified time-limit). If the required information is not provided on time the declaration is treated as containing an inaccuracy for the purposes of Schedule 1 to the Taxation (Cross-border Trade) Act 2018 and the Customs (Export) (EU Exit) Regulations 2019. The public notice will also specify who is eligible to use the scheme, where they may use it and what goods are exempt from this easement.

Leaving the EU without a deal will introduce new customs obligations for businesses that trade with the EU and will introduce significant administrative burdens in complying with those obligations. These regulations introduce a possible easement, which, if invoked, will assist trade to flow and allow extra time for businesses to meet their obligations. HMRC will only bring the regulations into force and utilise the power if it is considered necessary to do so.

8. The Excise Duties (Miscellaneous Amendments) (EU Exit) (No 3) Regulations 2019 and the Excise Duties (Miscellaneous Amendments) (EU Exit) (No 4) Regulations 2019

These regulations make minor amendments to existing excise legislation so that it aligns with customs legislation where appropriate, enabling some of the temporary easements introduced through the Customs (Import Duty, Transit and Miscellaneous Amendments) (EU Exit) Regulations 2019 and the Taxation (Cross-border Trade) (Miscellaneous Provisions (EU Exit) (No. 2) Regulations 2019 to be applied to excise goods, and for the consistent application of duty reliefs.

The changes include:

giving traders additional time to pay excise duty or enter goods into excise duty suspension in order to facilitate the flow of traffic from ports

providing a six month transitional period during which importers of tobacco products would not be required to provide a guarantee to defer duty payment, this is consistent with the guarantee easements for other goods

modifying the excise regime relating to the Channel Tunnel so that traders can continue to claim reliefs at the control zone at Coquelles

revoking legislation which deals with excise duty points and breaches of the internal and external Community transit procedures, these matters will subsequently be dealt with under the Excise Goods (Holding, Movement and Duty Point) Regulations 2010

enabling excise goods declared for the authorised use procedure to move under a duty suspension arrangement

ensuring energy products can continue to move in excise duty suspension when permitted

suspending the tobacco track and trace regime until a domestic regime is established

ensuring eligible traders can continue to claim relief from fuel duty in certain rural areas on EU exit

Whilst some of these amendments may result in businesses incurring initial familiarisation costs, HMRC believes the benefits resulting from this legislation will help to mitigate the costs of complying with new customs and excise obligations on UK-EU trade.

While the tobacco track and trace system is suspended, HMRC will work with businesses on the establishment of a domestic system, which avoids as far as possible businesses incurring additional costs and burdens beyond those already incurred.

9. The Customs and Excise (Miscellaneous Provisions and Amendments) (EU Exit) Regulations 2019

These regulations include a number of provisions to ensure that the UK will have a functioning customs and excise regime in the event that it exits the EU without a deal and introduces some additional temporary easements.

The provisions include:

giving traders taking advantage of the government’s duty deferment arrangements extra time before they are required to give HMRC a financial guarantee (the period of grace is extended to 6 months)

removing the exception to the requirement to give HMRC a guarantee where the paper-based common transit procedure is used for goods carried by rail, this aligns UK legislation with the requirements of the Common Transit Convention, although as there are no current users of this paper-based procedure in the UK, it is not expected to directly impact upon any person

ensuring that the amount of any financial guarantee required when goods are declared for special customs procedures (other than authorised use) and temporary storage is sufficient to cover any potential excise duty liabilities, this maintains the current arrangements that apply under the Union Customs Code

the operation of deemed presentation at non- RoRo locations, making it easier for traders to present their goods and leave the location of import

locations, making it easier for traders to present their goods and leave the location of import enabling a person authorised by HMRC to prepare and issue documents that accompany declarations required when bananas are imported, this will broadly retain arrangements that currently apply under EU customs legislation

clarifying that goods which leave the UK under an authorised use procedure for a location in the UK sector of the Continental shelf, for example an oil rig, will be chargeable goods on re-import to the UK

allowing additional time for businesses to complete certain elements of RoRo import and export declarations so that information can be updated and re-submitted to HMRC, without prior approval, current rules permit certain changes only with HMRC permission after the declaration has been submitted, the specific information to which this applies will be set out in a public notice, this facilitation will help to reduce potential delays at RoRo ports

import and export declarations so that information can be updated and re-submitted to HMRC, without prior approval, current rules permit certain changes only with HMRC permission after the declaration has been submitted, the specific information to which this applies will be set out in a public notice, this facilitation will help to reduce potential delays at ports various amendments to the rules on commercial goods in baggage, including replicating arrangements around the notification of export from RoRo ports for passengers travelling by Eurostar trains and providing an option for travellers that can make declarations orally or by conduct, to make them electronically, the former will help simplify the customer journey and reduce the administrative burden by removing the need for travellers to give notification of export to a Customs official at Eurostar terminals and the latter flexibility in how the declaration is made

ports for passengers travelling by Eurostar trains and providing an option for travellers that can make declarations orally or by conduct, to make them electronically, the former will help simplify the customer journey and reduce the administrative burden by removing the need for travellers to give notification of export to a Customs official at Eurostar terminals and the latter flexibility in how the declaration is made ensuring that appeal and review rights remain available in relation to HMRC decisions on non-duty related matters

Whilst adopting some of the easements included in these regulations will result in some initial administrative costs, HMRC expects the temporary easements to provide UK businesses that trade with the EU more time to adapt their business models in order to comply with their customs obligations. This will provide longer term benefits that will outweigh the initial cost of adopting them. In respect of the other provisions, HMRC anticipates that any additional costs to businesses of implementing them, including familiarisation costs, will be negligible.

Section D: Regulations with negligible cost or no impact

10. Value Added Tax (Disclosure of VAT Registration Information) (EU Exit) Regulations 2018

Currently, the ‘EU VIES VAT number validation’ service allows businesses to check whether an EU-based customer or supplier’s VAT number is valid. If the UK leaves the EU without a deal, UK VAT numbers will no longer be part of this service. These regulations replace EU regulations and allow HMRC to confirm the validity of a UK VAT number and disclose the associated name and address.

HMRC is developing an online service so that businesses can continue to validate UK VAT numbers in a similar way as they do now.

While there could be a small cost to UK and non-UK businesses associated with using a separate UK system to check UK VAT numbers, rather than being able to use the EU service, it is expected that it will be negligible. The new system will be free of charge and will not require registration. For businesses that use automated systems to check VAT numbers there may be a one-off cost of IT changes. The UK system will allow businesses to continue to carry out their due diligence checks online and meet their tax obligations.

11. The Statistics of Trade (Amendment etc.) (EU Exit) Regulations 2019

The government is committed to meet its international obligations with respect to reporting on trade and underpinning its independent trade policy with robust evidence gathered by collecting accurate and timely trade statistics. As part of the existing arrangements, the value of the movement of goods between EU member states is currently captured from VAT returns, with greater detail collected by the Intrastat system. This is the information collected through a monthly statistics Supplementary Declaration from which statistics are produced on the intra-EU movement of goods.

Not all businesses trading goods with other EU member states are required to complete a Supplementary Declaration, only those who exceed the current annual Intrastat exemption thresholds of £1.5m in goods trade for EU imports and/or £250,000 for EU exports. The data declared on the VAT return is used to inform which businesses should make Supplementary Declarations. Under the new rules, businesses who exceed this threshold will no longer be required to submit a Supplementary Declaration as the trade statistics information will now be sourced from the customs declaration. However, the Statutory Instrument ( SI ) retains the ability for HMRC to request the completion of a Supplementary Declaration in the event that a customs declaration is no longer required.

Extrastat is the term referred to data on trade in goods with non-EU countries and collected by customs authorities through customs declarations. If the UK leaves the EU without a deal, the Extrastat data collection will remain unchanged. However, the number of businesses expected to make customs declarations will rise to include those trading within the EU. Therefore the data which is currently collected through Intrastat returns will be sourced from these customs declarations rather than through a separate Intrastat process and so the current costs of submitting these will cease. There will be some familiarisation costs in completing a customs declaration but this is covered in section C.

Hence, HMRC does not anticipate any additional costs being incurred by businesses as result of these regulations.

12. The Customs (Contravention of a Relevant Rule) (Amendment) (EU Exit) Regulations 2018 and the Customs (Contravention of a Relevant Rule) (Amendment) (EU Exit) Regulations 2019

Existing domestic legislation governs the current customs civil penalty regime for breaches of rules that are largely set out in EU legislation. When the UK leaves the EU, an effective civil penalties regime for the UK customs regime will be required.

These regulations broadly replicate and amend existing customs civil penalty provisions. It will remove existing references to EU legislation, replacing them with the relevant sections of the TCTA 2018. They will set out the relevant rules, description of person liable, and the maximum financial penalty (which will be a limit of £2,500). Examples of where a civil penalty may be appropriate are where there is a failure to make a temporary storage declaration as required, or a failure by an authorised declarant to make available the documents required, or when goods are removed from a customs warehouse without authorisation.

Any possible increase in the number of civil penalties applied as a result of these amendments is difficult to quantify given that these penalties are applied on a case by case basis, allowing for any ‘reasonable excuse’ which businesses might have in not being able to fulfil their obligations. HMRC notes that businesses will need to familiarise themselves with a new penalty regime which will be a small cost. However, only non-compliant businesses will incur the cost of a penalty - this does not contribute towards the quantification of administrative burdens.

HMRC will apply a graduated approach to penalties to support transition.

13. The Crown Dependencies Customs Union (Isle of Man) (Jersey) and (Guernsey) (EU Exit) Orders 2018

These instruments will give effect to customs arrangements between the UK and the Crown Dependencies ( CDs ) which will maintain our current customs relationships when the UK leaves the EU. Three separate Orders will give effect to 3 arrangements: one new arrangement between the UK and Jersey, one new arrangement between the UK and Guernsey and one updated arrangement between the UK and the Isle of Man.

Together these arrangements will form a UK- CDs customs union under the TCTA 2018. The Orders do not themselves establish a UK- CDs customs union, but rather each Order allows the UK’s customs regime to reflect such an arrangement by providing the means necessary in domestic legislation to implement it.

Isle of Man

The Isle of Man is in a shared VAT and excise territory with the UK, meaning that no import VAT or excise duty is payable in respect of movements of goods between the UK and the Isle of Man. The Order relating to the arrangement with the Isle of Man reflects the wording of the Isle of Man Act 1979.

Under this Order, goods brought into the UK from the Isle of Man will continue to be treated as domestic goods under the TCTA 2018 and not to have been imported. Therefore, there will be no new direct costs to businesses either in the UK or the Isle of Man and no additional information requirements as a result of this Order.

Channel Islands

By contrast, while goods imported into the UK from the Jersey and Guernsey are not subject to import duty, they are subject to import VAT and excise duty. As a result, customs declarations are still required to be made in respect of goods coming in to the UK from the Channel Islands, as the making of a customs declaration is the trigger point for charging import VAT and Excise Duty.

The Guernsey Order and Jersey Order do not give effect to changes to existing processes, therefore there will be no new direct costs to businesses either in the UK or in the Channel Islands and no additional information requirements as a result of these Orders.

14. The Wharves and Temporary Storage Facilities (Approval Condition and Transitional Provision) (EU Exit) Regulations 2018

HMRC has taken on new legal powers to impose additional conditions on ports before they are approved for customs purposes. These are discretionary powers which will not be used unless HMRC decides to place a new obligation on ports.

Therefore, this legislation has no direct impact on businesses. Any new obligations will be set out in a future policy announcement. HMRC will update its estimate of impacts when the next set of regulations are laid.

15. Port Approvals: The Wharves, Airport Examination Stations and Temporary Storage Facilities (Approval Conditions) (EU Exit) Regulations 2018

This measure does not introduce new requirements; it formalises some of the existing practices following an application to HMRC for the approval of wharves and airport examination stations etc. Businesses seeking approval to operate a point of entry for goods will be required to supply facilities and amenities to the customs authorities free of charge.

HMRC and its authorised agencies have always required the provision of appropriate amenities and facilities to carry out their duties, at the expense of the applicant. Businesses such as ports, airports and temporary storage providers will benefit from having greater certainty about the approval process.

HMRC does not foresee any additional costs being incurred by these businesses as these regulations put the current application process onto a legal footing giving them a statutory right to appeal if the approval is refused.

16. The Customs (Temporary Storage Facilities Approval Conditions and Miscellaneous Amendments) (EU Exit) Regulations 2018

This formalises the existing approval process for businesses seeking to operate temporary storage facilities. Ensuring, for example, that they are sufficiently secure and that goods can be readily identified.

It also sets out the mechanisms for the presentation of goods between various modes of transport (road, rail and air and so on), ensuring they are consistent with current requirements. These obligations do not introduce any additional costs to businesses.

17. The Customs (Economic Operators Registration and Identification) (Amendment) (EU Exit) Regulations 2019

An EORI is a unique identification number used within the EU customs union to allow recognition of individual economic operators for customs purposes.

It is currently required by businesses who trade with countries outside the EU and importers to the EU. Having an EORI is a prerequisite for making an application for all customs authorisations and simplifications. It ensures that declarations and procedures are accurately matched to the goods so that they can be tracked, statistics gathered, and safety and security declarations accurately recorded.

These regulations continue the current mechanism of EU legislation and require registration for a UK issued EORI for economic operators and overseas based businesses where they will need to interact with UK customs. So all businesses who currently only trade within the EU will need to register for a UK EORI for the first time.

UK businesses will need to register to get a new UK EORI number to continue to trade across borders. There will also be a smaller population of non-UK businesses that will also need to apply for a UK EORI number. There will be no charge and it should take a few minutes for the business to complete, and a few days for the EORI number to be issued. Once obtained an EORI only expires once the business ceases activity.

HMRC therefore anticipates that there will be a negligible one-off cost to businesses in familiarising with and completing the new application process.

18. The Customs (Enforcement of Intellectual Property Rights) (Amendment) (EU Exit) Regulations 2019

These regulations continue a system designed to protect intellectual property rights from counterfeit goods imported or exported into or out of the UK. The regulations set out the process by which the holders of intellectual property can register their rights with HMRC, so that goods which are suspected of being counterfeit can be detained by Border Force when being imported or exported, pending investigation into their provenance. If found to be in breach of the holder’s rights the goods can be destroyed.

Under the current arrangements, businesses can register their European rights on an EU database. This is a service offered to both UK and non-UK businesses who can choose whether or not to make use of this protection. However, if the UK leaves the EU without a deal, holders of rights that are enforceable in the UK (for example, where they have a Trade Mark registered in the UK), must be registered on the new UK database.

Steps are being undertaken to transfer existing registrations to a new system, where applications were made through the UK authorities. However, for registrations which were made in another member state businesses will need to re-register on the new UK system if they choose to have their rights protected in the UK.

HMRC anticipates that the costs of EU businesses having to re-register will be negligible as the process of registration is expected to be simple as businesses will already be familiar with the system, and HMRC will make no charge for registration.

19. The Cash Controls (Amendment) (EU Exit) Regulations 2019

This SI introduces a requirement for individuals carrying £10,000 or more into or out of the UK to present a completed declaration to customs authorities as they cross the border. Its purpose is to target money laundering. The declaration is not a business responsibility - the legal responsibility lies with the bearer of the money. The SI gives Border Force the right to seize money where no declaration has been made, pending an investigation into its source and its intended use. Compliance with the SI also gives HMRC information on the movement of cash, which feeds into the risk profiles of individuals and their associates where they are acting on behalf of others.

Current EU law applies this process to borders of the EU with non-EU states, whereas this legislation applies it to the UK and its borders, both with the EU and the rest of the world.

There is no registration or authorisation involved and it is applied universally to all travellers entering and departing the UK. The cost to the individual is the time it takes to fill out the declaration. The individuals can range from couriers, commissioned to transport money to individuals of high net worth individuals.

Currently 1,500 individuals complete a declaration annually and a five-fold increase is estimated on departing the EU. The additional costs of completing a declaration are assessed to be negligible.

20. The Mutual Assistance on Customs and Agricultural Matters (Revocation) (EU Exit) Regulations 2019

Mutual assistance refers to the exchange of information and shared approach to the protection of customs duties throughout member states. Information is centrally shared, in particular, to help combat customs fraud.

If the UK leaves the EU without a deal, the existing EU legislation that sets out the information sharing arrangements would no longer be relevant to the UK as it only applies to member states. However, as the EUWA 2018 brought all EU regulations into UK law, this SI rescinds the obsolete regulation. There is no impact on business.

21. The Customs (Consequential Amendments) (EU Exit) Regulations 2019

This SI makes a number of minor amendments to existing UK customs regulations following the UK’s exit from the EU. The purpose of the regulation is to:

amend (where necessary) the customs regulations that remain in force after EU exit to ensure that applicable UK legislation works as intended, for example, by replacing references to EU legislation

remove from UK legislation those customs regulations that will no longer be relevant after EU exit

As all the amendments are minor and consequential, HMRC does not envisage any impacts being incurred by businesses.

22. The Customs (Records) (EU Exit) Regulations 2019

Under existing EU legislation, a business that is involved in a customs transaction must retain records for a prescribed period. These regulations will enable current record keeping requirements set out in EU law to be replicated into UK law following EU Exit.

They will not introduce any new record keeping requirements and therefore should have no new impact other than for those businesses that are involved with customs procedures for the first time. Even for these businesses the impact would be negligible because they would be expected to retain their EU related business records in order to comply with existing requirements for other taxes such as Self-Assessment, VAT and/or Corporation Tax.

23. The Customs Safety and Security (Penalty) Regulations 2019

The regulations are made under the European Communities Act 1972 (UK) to ensure that the UK has a safety and security penalty regime in place. They make provision for civil penalties for non-compliance with certain safety and security obligations, setting out when a penalty will become due and who will be liable. The regulations will continue to have effect upon exit ensuring the safety and security penalty regime remains operable after the UK leaves the EU.

HMRC notes that businesses will need to familiarise themselves with a new penalty regime which will be a small cost. However, only non-compliant businesses will incur a cost of a penalty - this does not contribute towards the quantification of administrative burdens.

HMRC will apply a graduated approach to penalties to support transition.

24. The Value Added Tax (Miscellaneous Amendments and Revocations) (EU Exit) Regulations 2019

These regulations amend or revoke 24 VAT regulations which make a number of necessary, consequential amendments to the VAT Regulations 1995 and other secondary legislation arising from the changes to the VAT Act 1994 made by TCTA 2018 and the EUWA 2018.

In particular, the amendments make changes to remove references to the EU and other member states so that there is no distinction between those transactions involving the EU and those involving the rest of the world, and it applies the definition of imports to include goods arriving from the EU as well as to imports from outside the EU.

It also revokes orders and regulations that only relate to ‘intra-community’ supplies or processes. These are technical amendments and will have no impact on individuals or businesses.

25. The Value Added Tax and Excise Personal Reliefs (Special Visitors and Goods Permanently Imported) (Amendment) (EU Exit) Regulations 2019

These regulations make consequential amendments to 2 existing Customs and Excise Orders to ensure the reliefs continue to apply as they do currently, to the same individuals and goods after exit from the EU.

The first Order (Customs and Excise Duties (Personal Reliefs for Goods Permanently Imported) Order 1992) grants relief from import VAT and excise duty on certain goods including personal possessions to persons who are, or will, become resident in the UK on a permanent or long term basis.

These regulations make consequential amendments to the Order to reflect the widened scope of import VAT following EU exit. It ensures that goods entering the UK from EU member states are relieved from VAT in the same way as goods from the rest of the world.

The second Order (Customs and Excise (Personal Reliefs for Special Visitors) Order 1992) grants reliefs from import VAT and excise duty on certain goods brought into the UK by diplomats and similar officials and to members of visiting forces of North Atlantic Treaty Organization ( NATO ) countries.

These regulations make consequential amendments to that Order to reflect the widened scope of import VAT following EU Exit. They ensure that goods entering the UK from EU countries are relieved from VAT in the same way as goods from the rest of the world.

HMRC does not envisage any impacts on these individuals as the SI relieves any import VAT and excise duty that would otherwise be due on goods imported from EU member states if the UK leaves the EU without a deal.

26. The Taxation (Cross-border Trade) Act 2018 (Value Added Tax Transitional Provisions) (EU Exit) Regulations 2019

The purpose of these regulations is to provide some of the necessary VAT transitional and savings provisions to ensure that there is a consistent set of rules to manage supplies of goods and services that are in progress as the UK leaves the EU. In particular, they provide that:

supplies of goods from EU member states that are on the way to the UK before exit day, but do not arrive until after exit day, are to be treated under the current (single market) rules and vice versa;

supplies of services that span exit day are apportioned on a fair and reasonable basis in line with established rules;

HMRC has the ability, after EU exit, to address errors and mis-declarations in relation to supplies of goods and services made before exit day

customer rights and responsibilities are maintained for transactions occurring before exit day

The transitional provision will provide certainty to business, in particular ensuring that transactions that span exit day are only subject to one set of tax rules. This transitional provision introduces no impacts beyond those covered by the wider impacts set out in this and other EU exit impact assessments.

27. The Excise Goods (Holding, Movement and Duty Point) (Amendment etc.) (EU Exit) Regulations 2019

In the UK, excise duty is charged on importation and manufacture of alcohol, tobacco and oils. However, under current EU legislation, excise goods (except certain oils) can undertake an entire movement, including across borders within the EU, in excise duty suspense. Duty suspension is where businesses do not pay duty until the goods are released for sale at their final destination.

These movements can take place between approved premises (for example tax warehouses) and are tracked using the Excise Management and Control System ( EMCS ). If the UK leaves the EU without a deal, this EU legal framework will no longer apply, and, in particular, the EMCS as operated by the UK will no longer be connected to the EMCS operated by the EU member states.

This will have the effect of ending the free movement of goods under excise duty suspension between the UK and the EU, and the arrangements that already exist for trade with countries outside the EU will apply.

This means that businesses moving excise goods between the UK and the EU will have to submit a customs declaration, following which they may choose to pay the excise duty at the frontier or suspend payment of the excise duty by entering the goods into excise duty suspension for the UK leg of the journey.

The impact of these regulations on excise businesses is the additional administrative costs of completing a customs declaration which is a cost that has been covered in the impact of the Customs (Import Duty) (EU Exit) Regulations 2018 and The Customs (Export) (EU Exit) Regulations 2019 Import and Export regulations set out in see section C.

For excise duty paid movements, the registered commercial importers scheme and the distance selling arrangements will become obsolete and replaced with the current rest of the world rules that are already in practice between the UK and non-EU countries.

This change will have a negligible impact on businesses, with such schemes primarily used for smaller, infrequent movements. It means that businesses will need to change their business practices by employing the services of a Registered Consignor or applying to become a Registered Consignor in their own right.

28. The Excise Duties (Miscellaneous Amendments) (EU Exit) Regulations 2019 and the Excise Duties (Miscellaneous Amendments) (EU Exit) (No.2) Regulations 2019

These regulations make miscellaneous changes to correct EU derived excise legislation and other deficiencies, in the event of the UK leaving the EU without a deal. The changes include in the main removing references to EU concepts and terminology that will no longer apply when the UK leaves the EU.

These changes will ensure that the UK continues to have a fully functioning and legally operable excise regime upon EU exit. These are technical amendments and will have no impact on individuals or businesses.

29. The Customs (Crown Dependencies Customs Union) (EU Exit) Regulations 2019

These regulations allow current customs arrangements for trade between the UK and the Crown Dependencies to continue after EU exit. They provide, for example, for HMRC to continue to issue tariff and origin information rulings to businesses wishing to import goods into the Crown Dependencies, and allow HMRC to authorise businesses established in the Isle of Man for some special customs procedures. Since the regulations retain current arrangements, there will be no impact on businesses.

30. The Customs (Revocation of Retained Direct EU Legislation, etc.) (EU Exit) Regulations 2019

These regulations revoke retained EU legislation which will not be needed if the UK leaves the EU without a negotiated deal, and ensure that imports and exports between the Channel Islands and the UK are excluded from the collection of trade statistics. There will be no impact on business as a consequence of this legislation as it is only intended to remove legislative anomalies in retained legislation, and maintain existing import and export trade statistics provisions for the Channel Islands, in the event of UK leaving the EU without a negotiated deal.

31. The Taxation (Cross-border Trade) (Miscellaneous Provisions) (EU Exit) Regulations 2019

These regulations set out the arrangements for travellers who bring commercial goods into the UK in accompanied baggage or in small motor vehicles. They also modify certain declaration requirements and make other miscellaneous amendments to existing customs regulations.

If the UK leaves the EU without a deal, commercial goods brought into the UK from the EU will be subject to the same requirements that currently apply to commercial goods brought into the UK from outside the EU and may be liable for import duty and VAT. With the exception of high risk goods (for example excise goods), these regulations allow travellers carrying small quantities of commercial goods – below a £900 threshold – to pass through ports (including RoRo locations) without having to submit a full customs declaration. To avoid creating new physical infrastructure at RoRo ports, the measure enables:

a traveller arriving from the EU into the UK at a RoRo listed port or a Eurostar terminal where no Red (Goods to Declare) Channels exist, to submit a simple online declaration to HMRC along with a payment of the import duty and VAT, this will be achieved by submitting an online form and making payment of the import duty and VAT on gov.uk, this will need to be done before arriving into the UK

listed port or a Eurostar terminal where no Red (Goods to Declare) Channels exist, to submit a simple online declaration to HMRC along with a payment of the import duty and VAT, this will be achieved by submitting an online form and making payment of the import duty and VAT on gov.uk, this will need to be done before arriving into the UK a traveller arriving from the EU into the UK at a port of entry where Red (Goods to Declare) Channels exist to make a simplified oral declaration and make payment to a Border Force officer in line with existing process and procedures

Where commercial goods exceed the £900 threshold, the measure requires travellers arriving into the UK at any port of entry from either an EU or non-EU country to pre-lodge a full customs declaration and to make payment of import duty through existing channels or through a customs agent up to five business days before arriving into the UK.

The one-off and ongoing costs of submitting declarations for commercial goods carried by travellers are incorporated into the existing administrative burden estimate for customs declarations.

The regulations also modify certain declaration requirements to the benefit of importers, allow arrangements currently applicable to the oil and gas industry in relation to the UK sector of the continental shelf to continue post exit day and make a variety of minor technical amendments to other regulations. Some of these amendments address deficiencies identified after the original regulations were made, while others provide additional detail that was impossible to address when they were introduced (for example, by inserting regulations that cross refer to the Department of International Trade regulations, that were not made until March 2019). The regulations also make minor changes that are necessary to ensure consistency with easements introduced in subsequent regulations.

These provisions introduce no impacts beyond those covered by the wider impacts set out in this and other EU exit regulations.

32. The Finance Act 2011, Schedule 23 (Data-gathering Powers) (Amendment) (EU Exit) Regulations 2019 and the Data-gathering Powers (Relevant Data) (Amendment) (EU Exit) Regulations 2019

The Finance Act 2011, Schedule 23 (Data-gathering Powers) (Amendment) (EU Exit) Regulations 2019 amend Schedule 23 to the Finance Act 2011 to provide HMRC with the power to request information from postal operators to support compliance activity for the Value Added Tax (Postal Packets and Amendment) (EU Exit) Regulations 2018 (Postal Packets Regulations 2018).

The Postal Packets Regulations 2018 shift the liability for import VAT on commercial consignments of goods with a value of £135 or less from the importer to the overseas supplier of the goods. The Postal Packets Regulations 2018 were laid on 18 December 2018 and will be commenced in the event that the UK leaves the EU without a negotiated agreement.

In order to protect revenues and guard against the potential for VAT-free goods to undermine the UK high street, HMRC will need to identify parcels that do not comply with the Postal Packets Regulations 2018. The Finance Act 2011, Schedule 23 (Data-gathering Powers) (Amendment) (EU Exit) Regulations 2019 will allow relevant data to be collected from UK based postal operators, but can only be exercised in relation to VAT. The definition of “postal operator” is wide – it covers any person who conveys parcels from one place to another or who receives, collects, sorts or delivers parcels.

The Data-gathering Powers (Relevant Data) (Amendment) (EU Exit) Regulations 2019 amend the Data-gathering Powers (Relevant Data) Regulations 2012 to specify the type of data that can be requested from postal operators.

UK postal operators will incur a one off cost to familiarise with the new requirements and ongoing costs to submit requested information. To minimise the administrative burden placed on the postal operators, HMRC will consult with individual postal operators prior to serving a data holder notice to understand the information held and the format in which the information is held. HMRC cannot request data that a business does not already collect or for them to supply data in a format in which it is not currently held.

33. The Value Added Tax (Miscellaneous Amendments, Revocation and Transitional Provisions) (EU Exit) Regulations 2019

These are the second VAT miscellaneous amendments regulations - the first being the Value Added Tax (Miscellaneous Amendments and Revocations) (EU Exit) Regulations 2019 which were laid on 22 January 2019. The regulations pick up a number of consequential amendments to the Value Added Tax Regulations 1995 and other secondary legislation (not covered by the January regulations) arising from the changes to the Value Added Tax Act 1994 (VATA 1994) made by the TCTA 2018 and the EUWA 2018 or subsequent legislation.

The changes include:

transactions with the EU, which are the subject of these rules, being treated in the same way as transactions with the rest of the world;

substitute references to EU customs legislation with references to new UK customs legislation for imports and exports;

consequential changes required as a result of the introduction of other EU Exit regulations

These regulations also make transitional and savings provisions for VAT secondary legislation where it has been amended as a result of the UK leaving the EU without a negotiated arrangement. These provisions will supplement the Taxation (Cross-border Trade) Act 2018 (Value Added Tax Transitional Provisions) Regulations 2019 to ensure that there is a consistent set of rules to manage supplies of goods and services that are in progress as the UK leaves the EU.

They will provide certainty to business, in particular ensuring that transactions that span exit day are only subject to one set of rules and cannot therefore be subject to double taxation and that any legal rights, powers, obligations, liabilities and restrictions that exist before exit day can still be enforced or exercised after exit day in relation to those earlier time periods.

The regulations also provide technical amendments and rules for transactions that span EU exit that involve a change and to deal with other transitional issues.

The technical amendments will have little or no impact on individuals or businesses. Any impacts in relation to the transitional provisions will be subsumed within the wider impact of the related changes.

34. The Value Added Tax (Miscellaneous Amendments and Transitional Provisions) (EU Exit) Regulations 2019

These regulations make a technical amendment to the VAT Act 1994 which could not be included in previous miscellaneous regulations. They amend the transitional and other provisions introduced in the Value Added Tax (Miscellaneous Amendments, Revocation and Transitional Provisions (EU Exit) Regulations 2019 to ensure that these provisions still work following the postponement of exit day. These technical amendments will have little or no impact on businesses. Any impacts in relation to the transitional provisions will be subsumed within the wider impact of the related changes.

Section E: Other impacts

Exchequer impact

In the event that the UK leaves the EU without a deal, final costing would be produced and would be subject to scrutiny by the Office for Budget Responsibility and would be set out at a later date.

Economic impact

This impact assessment covers HMRC’s best assessment of the direct costs and administrative burdens to businesses from changes to the movement of goods if the UK leaves the EU without a deal. It is not an assessment of the macroeconomic impact of these changes.

The government has fulfilled its commitment to provide economic analysis of different EU exit scenarios to Parliament and published its Long-term Economic Analysis (Command Paper) on 28 November 2018.

The published analysis is not a forecast of the UK economy but sets out the economic impact of changes to the UK’s trading relationships under different EU exit scenarios against current arrangements. The analysis includes a scenario in which the UK leaves the EU without a deal and captures the full economic effect of this outcome, including implicitly, the costs and frictions from changes to the customs arrangements. The government’s analysis looks at long-term economic impacts and does not capture short-term operational or wider economic effects.

Equalities impact

Equality impacts have been considered across all of these changes and HMRC does not anticipate that there will be impacts on groups sharing protected characteristics. The only possible policy area that could give risk to accessibility is the electronic submission of a customs declaration but HMRC will be providing for non-digital alternative channels.

HMRC also believes there will be positive benefits from this measure, as the ability to enable digital declarations will reduce queues, so anyone needing assisted digital support will benefit from reduced waiting times. By the very nature of the activity, HMRC thinks m