Impact assessment

HMRC impact assessment for the movement of goods if the UK leaves the EU without a deal (second edition)

Updated 7 October 2019

Section A: Background

Introduction

This is the second edition of the impact assessment published on 4 December 2018. It has been updated to include the impacts of the customs, VAT and excise regulations laid before Parliament in January 2019, alongside those laid in November 2018 under The Taxation (Cross-border Trade) Act 2018 (TCTA 2018) and the EU Withdrawal Act 2018 (EUWA 2018).

The government wants a smooth and orderly exit from the EU, with a deal, that protects our union, gives us control of our borders, laws and money, and means that we have an independent trade policy. The government is working towards an ambitious and comprehensive future partnership with the EU, delivering a close economic and security relationship that is in the interests of both the UK and the EU.

Delivering the deal negotiated with the EU remains the UK government’s top priority. Nevertheless, the government is progressing no deal preparations to ensure the country is prepared for every eventuality.

As part of the no deal preparations, HMRC has published technical notices on customs, excise and VAT procedures, published a partnership pack for representative bodies and third parties to help assist businesses in preparing for a no deal scenario and issued 3 letters to 145,000 VAT registered businesses trading with the EU only on the actions they need to take and changes they need to be aware of.

The latest of these letters included further information on new and temporary easements to support continued trade fluidity. The impact of these and other easements, including the Safety and Security easements which were announced on 19 February 2019 will be included in the third edition of this impact assessment covering the regulations laid in Parliament in February and March 2019.

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, import 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 in a no deal scenario.

Under the TCTA 2018 and the EUWA 2018 the government is introducing regulations before the end of March 2019 that will set out the legal framework for a new customs arrangement and make amendments to existing VAT and excise legislation in the event of a no deal scenario. The impact of the TCTA 2018 is set out in reference to these regulations.

The regulations are being laid in Parliament in 3 main tranches.

The first was laid in November 2018, followed by the second in January 2019 and a further tranche, which is being laid at the end of February and beginning of March 2019.

As the impact of the regulations will cut 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 for regulations that have been laid in November through to the end of January. A third edition of the impact assessment will include the impacts of the further regulations that will be laid in Parliament in February and March.

In addition to this overarching impact assessment, separate impact assessments will be published for:

• VAT and parcels
• VAT and services
• UK Tariff and related regulations (which will include goods relieved from any UK Tariff)
• The trade arrangements for movement of goods between Northern Ireland and Ireland for customs, VAT and excise

This impact assessment covers regulations, which can be found here.

The November 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 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
• 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

Before 29 March 2019

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 in a ‘no deal’ scenario?

In the unlikely event that the UK leaves the EU on 29 March 2019 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 on 29 March 2019 in the event of a ‘no deal’ scenario. See the pages on Trading with the EU if there’s no Brexit deal, VAT for businesses if there’s no Brexit deal, and the Partnership pack: preparing for changes at the border after a ‘no deal’ EU exit.

Policy objective

The legislation being introduced for customs, VAT and excise will ensure that in a no deal scenario 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 and later legislation introduces a series of enduring facilitations and temporary easements that will allow businesses to import and export their goods more easily across the border.

These easements will apply particularly when submitting customs declarations (and safety and safety declarations) for movements between the UK and EU member states, and a new VAT postponed accounting procedure that will also significantly help businesses to manage their cash flow.

Section B: Summary of impacts

The government does not want or expect a no deal scenario, but if the UK leaves the EU without a deal, HMRC would commence these regulations so that they come into effect on exit. Businesses currently trading within the EU would be faced with complying 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 rendering a safety and security declaration, but also outlines various facilitations 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.

These impacts are considered for each of the regulations laid in November 2018 and January 2019, while the third edition of this impact assessment will outline the benefits of further easements introduced in the next tranche of regulations.

The summary of impacts introduced by each regulation 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 is a core obligation for the movement of goods between the UK and the EU under a no deal scenario. 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 note?

The substantive provisions in relation to the customs, VAT, and excise regimes after EU Exit are being 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 being set out in this overarching impact note as those regulations are laid.

The regulations are being introduced in tranches over a number of months. Therefore, HMRC has decided to present the impact of the legislation laid as a whole, updating this document accordingly for each new tranche.

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 second 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

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 they can be deferred.

While these obligations already exist for imports and exports to and from countries outside of the EU, they will be a significant new and ongoing administrative burden for businesses moving goods between the UK and the EU.

However, for customs we are also extending 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 will incur one-off costs in applying for them, and ongoing costs to maintain them (for example maintaining a customs warehouse or submitting a transit declaration), the longer term 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.

Maximising business access to facilitations, where appropriate, is a core objective of HMRC as it continues to look at ways of reducing the administrative burdens of EU exit, for example by providing further guidance on how to prepare for and comply with requirements in a no deal scenario, and providing support for the customs intermediary sector to help foster more customs agents who can help businesses meet these new obligations.

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

(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 published static estimate of the increase in the total number of declarations (for both import and export) is 205 million 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, 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 £55 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 published static estimates for the administrative burden on UK businesses from additional import and export declarations is £6.5 billion, with import declarations accounting for around half of this figure. The £6.5 billion estimates the administrative burden of completing customs declarations for all EU trade in goods movements.

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 total ongoing administrative burden on UK-EU trade is c£13 billion 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.

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.

(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 £6.5 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.

HMRC is looking at ways of reducing the administrative burden of submitting customs declarations and simplifying the way businesses interact with the declaration system. This will include easements such as the introduction of the new Transitional Simplified Procedure for customs to which businesses can sign up to allow them to move goods from the EU into the UK without making a full customs declaration at the border. This easement will be covered in the third edition impact assessment as the SI will be laid in the February to March tranche.

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

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. The government will be setting the UK Tariff for a no deal scenario in 2019 which will be accompanied by a separate assessment of impacts.

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

In the event of a no deal scenario, 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 do 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. Regulation 3 of this section provides 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 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 in addition to an estimated 100,000 non-VAT registered businesses who also 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.

The incentives for businesses will be determined by a number of factors which will vary by sector, business model and type of trade.

Further regulations are planned to relax the guarantee requirements in certain circumstances, for a limited time and will be covered in the February/March tranche.

Excise businesses that have only previously imported excise goods from the EU may need to make arrangements to gain access to a deferment account. Access to a deferment account is necessary to pay any import duties that are payable on imports not intended for duty suspension that are cleared via HMRC’s IT system. This may increase the costs of importing excise goods – see section D, regulation 23 for further details of the impacts.

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 benefits of an AEO(C) accreditation are:

• 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 a business’ 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 will already be up and running 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. ^{[footnote 1]}

It’s 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 HMRC thinks it is likely to be businesses from the 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 which, in a no deal scenario, are assumed to be unilateral.

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
• 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 determined to be domestic then no further action is required. If deemed to be chargeable then they are under HMRC control and either a customs or temporary storage declaration must be made. If a temporary storage declaration is made, the goods are placed into a temporary storage facility and the importer has up to 90 days 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

The main purpose of this regulation is to enable the UK to continue to meet its safety and security obligations under the World Customs Organisation (WCO) Framework of Standards 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 electronic cargo information at consignment level is gathered by customs authorities 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.

The UK currently meets these obligations as part of the EU security zone, 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. In the event of a no deal scenario, this regulation extends this obligation to all movements into and out of the UK.

Under the regulation, safety and security information will be provided by the submission of an entry summary declaration (ENS) for imports or an exit summary declaration (EXS) for exports.

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 the Import Control System either through software or a Community Service Provider and therefore made in addition to a customs declaration for import purposes which is submitted into 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 customs combined export and exit summary declaration submitted into CHIEF or CDS so the impacts of this will be covered by the impacts of submitting a customs export declaration.

In the event of a no deal scenario, the UK will no longer be part of the EU security zone and 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 this will present a significant ongoing administrative burden for them, especially when submitting an ENS as it will be a new legal obligation and an additional cost to submitting a customs declaration for import purposes.

In practice, HMRC expect the cost of submitting the data required to be passed on by the carrier or the operator to the importer. 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.

The government is continuing to engage with industry on the application of their safety and security obligations. This includes looking at how information requirements can be made less onerous while continuing to provide border agencies with a sufficient and accurate risk assessment.

The SI laid on the 31 January does not include the temporary waiver to the Safety and Security declaration requirements for imports from EEA states which was announced on 19 February 2019. The detail on this waiver will be set out in the third edition impact assessment which will cover the regulations laid in Parliament at the end of February/beginning of March 2019.

The other aspect of this regulation is to replace or remove terminology so as to enable an AEO(S) facilitation to continue to operate in the event of a no deal scenario. 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.

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

This regulation provides for postponed accounting for import VAT in the event of a no deal scenario. 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.

In a no deal scenario 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 this regulation, 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

These are key facilitations as they allow businesses to reduce or suspend the payment of import duty on goods imported to the UK to be processed, or to be used for other specified purposes. This provides significant cash flow benefits for businesses. In some cases, for example, where goods are re-exported following processing, the duties are actually discharged and will not be payable at all. These special procedures are currently only available for businesses dealing with goods coming in from outside the EU.

These regulations ensure that in the case of no deal, businesses currently authorised in the UK to use special procedures will continue to be able to import goods into the UK to process, repair or store them whilst duties are suspended, providing cash flow benefits to traders.

As EU goods will be treated in the same way as goods imported from the rest of the world, there is likely to be an increase in the number of businesses applying to use special procedures for goods imported from the EU, in order to suspend duties and reduce to some extent the significant impact on existing business models and supply chains of imposing customs controls. The special procedures and their benefits are:

• customs warehousing – this allows traders to hold goods in an approved warehouse (either operated by them or another business) with import duty, import VAT and excise duty payments suspended until the goods are moved into free circulation or another customs procedure - if goods are re-exported from the warehouse then duty is discharged altogether

• inward processing - allows businesses to import goods for processing or repair with import duty and import VAT suspended, the duty becomes payable when those goods are declared to the free circulation procedure or another customs procedure - no liability for import duty or import VAT will arise if the goods are re-exported or entered into another special procedure - these regulations will enable UK traders to use inward processing for goods imported from the EU and from the rest of the world

• outward processing - this currently applies to UK goods sent outside the EU for an approved process and then re-imported; import duty, import VAT and excise duty are calculated on the value of the process completed rather than the total value of the goods - these regulations will enable UK traders to re-import processed goods from the EU as well as the rest of the world and pay duty only on the value added by that process

• 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 - these regulations will ensure that UK imports from the EU can also be imported at a reduced or nil rate if used for a prescribed purpose

• temporary admission - this allows goods to be temporarily imported into the UK such as samples, professional equipment or items for auction, exhibition or demonstration - as long as these goods are not altered while they are within the UK, no import duty or import VAT will be payable

HMRC anticipates an increase in the number of businesses seeking authorisations to use special procedures in the UK as EU goods will be treated in the same way as rest of world goods. If a business importing goods from the EU to the UK wishes to suspend duties whilst processing, repairing or storing them, then they will need to apply for authorisation to use a special procedure.

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

Based on this HMRC anticipates increased applications from businesses in these sectors that are currently trading with the EU, particularly for these special procedures. However, it is difficult to estimate the possible increase in businesses that will want to use special procedures as businesses will have to weigh up the benefits of becoming authorised (as set out above) against the cost.

The costs are likely to include the following:

• familiarisation with the processes they are required to comply with
• for businesses wishing to operate a customs warehouse: acquiring or renting a building, maintaining and staffing it
• acquiring a guarantee
• 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

HMRC thinks these one-off costs and the ongoing costs, for example costs of maintaining customs warehouses will be significant but businesses will only incur these costs if they choose to use the special procedures. We anticipate that this will only be where the long term benefits of deferring or even suspending import duty and import VAT will help to reduce the overall administrative burden of paying import duty and import VAT.

Further regulations are planned to relax the guarantee requirements in certain circumstances, for a limited time.

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

The transit procedures are facilitations that can help businesses move goods across a number of customs territories without the need to submit a full customs import declaration or pay import duty until the point of destination. This provides a significant cash flow benefit, and eases the administrative burden when moving goods across multiple customs territories. It also covers the procedures for the movement of imported goods within the UK. The transit procedures are:

Common Transit Convention (CTC)

The CTC is a customs procedure that suspends import duty on goods travelling through eligible countries (Contracting Parties) until they have arrived at the customs office of destination, where they are subject to the destination country’s import procedures.

Common transit arrangements currently cover movements of goods by road, rail or sea within the EU or between the EU and countries that are other contracting parties to the CTC. Once the UK leaves the EU, it will become a separate customs territory but the UK will accede to the CTC in its own right when EU law ceases to apply.

Membership of the CTC will help ensure the government maintains frictionless trade that enables businesses to move goods across the border or territories under guarantee without having to pay import duty, import VAT and excise duty until entering the final customs territory. Benefits of the CTC include:

• a streamlined and automated customs arrangement to facilitate the free flow of goods
• the removal of the requirement for customs declarations and payments of import duty until the goods reach their destination, minimising administrative costs and reducing delays

To benefit from the common transit arrangements, declarations under the common transit system must be made electronically at the office of departure, using the New Computerised Transit System (NCTS) which is used by all common transit countries. In exceptional circumstances, such as an IT systems failure, a paper copy of the declaration may be submitted. The declaration must be entered on the NCTS before any goods are authorised for movement. Once approved, the businesses will be able to download a Transit Accompanying Document (TAD). This must be presented along with the goods, when entering a new customs territory, at an office of transit and finally at the office of destination.

The costs are likely to include the following:

• familiarisation of the CTC process and requirements
• 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 ^{[footnote 2]}
• submitting and presenting the transit declaration
• an increase in the number of records to be retained (paper TADs have to be retained for 6 years).
• the cost of securing a guarantee against the transit liabilities

International Road Transport (TIR) Convention

This is an international agreement, comprising 73 member countries, allowing for international carriage of goods under duty suspension. As with other customs transit procedures, the TIR procedure enables goods to move under customs control, under financial guarantee, across international borders without the payment of the duties and taxes until the goods reach their final destination. A condition of the TIR procedure is that the movement of the goods must include transport by road through some portion of the journey.

This is a system already used by UK importers and exporters who trade with countries outside the EU. HMRC does not expect a significant increase in TIR transit movements when the UK accedes to the CTC in its own right.

The costs are likely to include the following:

• familiarisation of the new process for UK businesses who currently trade with the EU only
• additional administrative procedures for businesses to secure guarantees
• agent costs where businesses elect to use them to meet transit requirements

Domestic transit

This procedure allows the suspension of import duty where chargeable goods are moved between 2 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 type of costs of moving goods under domestic transit will be similar to the ones set out in CTC and will only be incurred if the ongoing costs are outweighed by the long term benefits.

The transit procedures are another facilitation that UK businesses will choose to adopt if the one-off and ongoing costs of applying to use and administer the schemes are offset by the cash flow benefits. It is difficult for HMRC to ascertain the number of businesses that will apply to use these facilitations but it predicts the numbers will result in significant one-off and ongoing costs which will be outweighed by the long term benefits gained by use of the procedures, including suspension of import duty.

Section D: Regulations with negligible cost or no impact

6. Value Added Tax (Disclosure of VAT Registration Information) (EU Exit) Regulations 2018 – facilitation

Currently, the ‘EU VIES VAT number validation’ service allows businesses to check whether an EU-based customer or supplier’s VAT number is valid. In a no deal scenario, 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.

7. 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 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. Under a no deal scenario, 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 this regulation.

8. 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.

9. 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 (IoM).

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 (IoM)

The IoM 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 IoM. The order relating to the arrangement with the IoM reflects the wording of the Isle of Man Act 1979.

Under this Order, goods brought into the UK from the IoM 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 IoM and no additional information requirements as a result of this Order.

Channel Islands (CIs)

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 CIs, 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 CIs and no additional information requirements as a result of these Orders.

10. 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.

11. 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 this regulation puts the current application process onto a legal footing giving them a statutory right to appeal if the approval is refused.

12. 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.

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

An Economic Operator Registration and Identification (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 pre-requisite 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 to be tracked, statistics gathered, and safety and security declarations accurately recorded.

This regulation continues the current mechanism of EU legislation and requires 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.

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

This regulation continues a system designed to protect intellectual property rights from counterfeit goods imported or exported into or out of the UK. The regulation sets 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, under no deal arrangements, 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.

15. 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.

16. 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.

Under a no deal scenario, 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.

17. 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.

18. 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. This regulation will enable current record keeping requirements set out in EU law to be replicated into UK law following EU Exit.

It 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.

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

The regulation is made under the European Communities Act 1972 (UK) to ensure that the UK has a safety and security penalty regime in place. It makes 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 regulation will continue to have effect in the event of a no deal scenario 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.

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

This regulation amends or revokes 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.

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

The regulation makes 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.

This regulation makes 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 NATO countries.

This regulation makes consequential amendments to that Order to reflect the widened scope of import VAT following EU Exit. It ensures 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 in the event of a no deal scenario.

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

The purpose of this regulation 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.

23. 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 this regulation 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.

24. 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.

Section E: Other impacts

Exchequer impact

In the event of a no deal scenario, 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 in a no deal scenario. 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 no deal scenario which 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 most businesses engaging with this measure will all have access to the internet.

Declaration

The Right Honourable Mel Stride MP, Financial Secretary to the Treasury, has read this impact assessment and is satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impacts of the measure.

Annex A: Summary of impacts

Regulation	Impact
1. The Customs (Import Duty) (EU Exit) Regulations 2018 and the Customs (Exports) (EU Exit) Regulations 2019	Confers an obligation - significant cost. The impact of leaving the EU introduces the obligation to submit import and export declarations and the payment of import duty, where appropriate. These are significant ongoing administrative costs impacting UK and EU businesses of all sectors. These costs can be reduced to some extent by making use of a number of facilitations such as the accreditation of an authorised economic operator. In respect of this accreditation, it will have significant one off cost but this will be outweighed by the long term benefits of simplifying the declaration process.
2. The Customs Safety and Security Procedures (EU Exit) Regulations 2019	Confers an obligation – significant cost: Leaving the EU without a deal means leaving the EU security zone, therefore safety and security declarations will need to be submitted to Customs by the carrier or operator transporting goods across the UK border. This will be a significant administrative burden for businesses moving goods between the UK and the EU. These costs can be reduced to some extent by applying for accreditation as an authorised economic operator. In respect of this accreditation, it will have significant one-off cost but this will be outweighed by the long term benefits of simplifying the safety and security declaration process.
3. The Value Added Tax (Accounting Procedures for Import VAT for VAT - Registered Persons and Amendments) (EU Exit) Regulations 2019	Optional facilitation – positive impact: For VAT registered businesses this facilitation introduces postponed accounting which allows businesses to defer the payment of import VAT until the VAT return is due. It preserves the current cash flow benefit businesses have that currently trade within the EU, using acquisition VAT and provides a significant cash flow benefit to businesses that import goods from outside the EU.
4. The Customs (Special Procedures and Outward Processing) (EU Exit) Regulations 2018	Optional facilitation - positive impact: Sets out detailed rules on a number of important but optional special customs procedures for UK established businesses. Likely to be taken up by businesses in the wholesale, retail and manufacturing sectors. These facilitations will introduce significant one-off and ongoing costs but in the long term will help reduce to some extent the administrative burden of paying import duty and import VAT by deferring the point of payment or, in certain circumstances, suspending the import duty and import VAT payments altogether.
5. The Customs Transit Procedures (EU Exit) Regulations 2018	Optional facilitation - Positive Impact: An optional facilitation for UK businesses that allows goods to be moved across customs territories. HMRC thinks there will be significant one-off and ongoing costs of applying and using the procedure but the long term benefits will outweigh these costs by giving businesses cash flow benefits and deferring the requirement to submit a full declaration and payment of import duty and import VAT until the goods reach their office of destination.
6. The Value Added Tax (Disclosure of Information Relating to VAT Registration) (EU Exit) Regulations 2018	Optional facilitation - Negligible cost: Businesses making supplies both to the UK and EU member states will need to use the UK service as well as the EU service to check VAT numbers, rather than the one service.
7. The Statistics of Trade (Amendment etc.) (EU Exit) Regulations 2018	Confers an obligation – no impact: Amends existing EU legislation to retain existing obligations to submit Intrastat returns. No additional cost to business.
8. 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	Confers an obligation - negligible one-off cost: UK businesses trading only with the EU will need to understand the penalty regime and there will therefore be a small familiarisation cost. However, costs incurred as a direct result of non-compliant activity are not included as part of quantifying the administrative burden.
9. The United Kingdom-Crown Dependencies Customs Union (Isle of Man) (EU Exit) Order 2018 The United Kingdom-Crown Dependencies Customs Union (Jersey) (EU Exit) Order 2018 The United Kingdom-Crown Dependencies Customs Union (Guernsey) (EU Exit) Order 2018	Confers an obligation – no impact. Introduces an obligation which maintains current rules so has no impact on UK or IoM businesses. Confers an obligation – no impact. Introduces an obligation which maintains current rules so has no impact on UK or Jersey businesses. Confers an obligation – no impact. Introduces an obligation which maintains current rules so has no impact on UK or Guernsey businesses.
10. The Wharves and Temporary Storage Facilities (Approval Condition) (EU Exit) Regulations 2018	Confers powers to tertiary legislation – no impact: Introduces a new discretionary power to impose an obligation on ports but it has no impact currently as a final decision has not been taken on how it will be exercised or when it will be commenced.
11. Port Approvals: The Wharves, Airport Examination Stations and Temporary Storage Facilities (Approval Conditions) (EU Exit) Regulations 2018	Confers an obligation – no additional impact: Introduces an obligation that has no additional impact on ports, airports or temporary storage locations.
12. The Customs (Temporary Storage Facilities Approval Conditions and Miscellaneous Amendments) (EU Exit) Regulations 2018	Confers an obligation – no additional impact: Formalises the existing approval process for businesses seeking to operate temporary storage facilities adding no additional burdens or impact. Also sets out the mechanisms for the presentation of goods between various modes of transport (road, rail, air etc), ensuring they are consistent with current requirements.
13. The Customs (Economic Operators Registration and Identification) (EU Exit) Regulations 2019	Confers an obligation - negligible one-off cost on businesses: Introduces a new requirement to register for a UK issued EORI for economic operators and overseas based businesses where they will need to interact with UK customs. Businesses who currently only trade within the EU will need to register for a UK EORI for the first time. There will be a small, negligible, one-off cost administrative cost to register as the registration process should be quick and simple to complete.
14. The Customs (Enforcement of Intellectual Property Rights) (EU Exit) Regulations 2019	Confers an optional obligation – negligible one-off cost for EU businesses: Continues a system designed to protect intellectual property rights where counterfeit goods are imported or exported into or out of the UK. The SI sets out the process by which the holders of Intellectual Property can register their rights with HMRC.
15. The Cash Controls (Amendment) (EU Exit) Regulations 2019	Confers an obligation – negligible impacts on individuals: 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.
16. The Mutual Assistance on Customs and Agricultural Matters (Revocation) (EU Exit) Regulations 2019	Rescinds obsolete EU legislation on information sharing between member states. There is no direct impact on businesses.
17. The Customs (Consequential Amendments and Revocation) (EU Exit) regulations 2019	Confers an obligation - no impacts: This regulation makes small changes to UK legislation and removes regulations that will no longer be applicable if the UK exits the EU.
18. The Customs (Records) (EU Exit) Regulations 2019	Confers an obligation - no new additional impact on businesses: Introduces the same record keeping requirements that business currently need to comply with when trading with the EU.
19. The Customs Safety and Security (Penalty) Regulations 2019	Confers an obligation - negligible one-off cost: UK businesses required to meet safety and security obligation will need to understand the penalty regime and there will therefore be a small familiarisation cost. However, costs incurred as a direct result of non-compliant activity are not included as part of quantifying the administrative burden.
20. The Value Added Tax (Miscellaneous Amendments and Revocations) (EU Exit) Regulations 2019	Confers an obligation - no impact on businesses or individuals: Makes a number of technical amendments to the VAT Regulations 1995 and other secondary legislation arising from the changes to the VAT Act 1994 made by the TCTA 2018 and the EUWA 2018.
21. The Value Added Tax and Excise Personal Reliefs (Special Visitors and Goods Permanently Imported) (Amendment) (EU Exit) Regulations 2019	Optional facilitation - no impacts on individuals: Relieves any import VAT and excise duty that would otherwise be due on goods brought from EU member states by certain individuals in certain circumstances in the event of a no deal scenario.
22. The Taxation (Cross-border Trade) Act 2018 (Value Added Tax Transitional Provisions) (EU Exit) Regulations 2019	Confers an obligation – no impacts beyond those covered by the wider impacts set out in the impact assessment. The transitional provisions provide certainty to business in respect of those transactions that span exit day to ensure they are only subject to one set of VAT rules.
23. The Excise Goods (Holding, Movement and Duty Point) (Amendment etc.) (EU Exit) Regulations 2019	Confers an obligation - negligible impact: Introduces changes so that movements will be treated the same as non-EU movements after EU exit. In addition, the changes are consequential upon the UK leaving the EU without a deal. There will be a small negligible cost as businesses will need to employ the services of Registered Consignor or become a Registered Consignor in their own right.
24. The Excise Duties (Miscellaneous Amendments) (EU Exit) Regulations 2019 and the Excise Duties (Miscellaneous Amendments) (EU Exit) (No.2) Regulations 2019	Confers an obligation – no impact on business: These SIs make miscellaneous changes to correct European Union (EU) derived excise legislation and other deficiencies, in the event of the UK leaving the EU without a deal.

1. This information comes from a live feed and will be subject to change. ↩

2. Authorised consignee – person or firm authorised by government to receive goods under the transit procedure (office of destination) (usually the buyer) named in the transportation documents/authorised consignor – person or firm authorised by government (usually the seller) who has ownership of the goods to move goods under the transit procedure (office of departure). ↩