Customs Duty – Free UK/EU Trade under the TCA

When UK Prime Minister, Boris Johnson, announced in December 2020 that the UK and EU had reached a Brexit deal, known as the Trade and Cooperation Agreement (TCA) starting 1^st January 2021, most companies breathed a sigh of relief.

It appeared all of the possible issues which would have resulted from a no-deal Brexit had dissipated and now the agreement would resolve many UK/EU trading companies’ concerns and worries.

However, it soon became apparent to many companies, perhaps which were not familiar with how Free Trade Agreements work in practice, that the terms of the TCA were more complex and difficult to understand than first thought.

In fact with less than one week to review and digest the terms of the agreement, it became apparent that rather than resulting in less work in relation to importations and exportations, the TCA resulted in more work around the complex Rules of Origin.

Based on our experience to date, it is clear than some companies are not considering all elements of the Rules of Origin and the requirement to ensure the UK and/or EU process taking place is considered more than “Insufficient Process”, with some companies just considering the UK/EU value element.

It is imperative to ensure the Rules of Origin are fully understood and it can be demonstrated that the process/manufacture completed in the UK and/or EU confers origin. Any future HMRC audit will certainly concentrate on this and as such we are in no doubt that there will be growing exposures ahead for businesses that do not invest in managing this issue now. Incorrect origin statements could result in duty assessments of up to a three-year period for the importer of the goods, which may well be an EU customer.

We, at Kreston Reeves, are assisting companies to navigate the TCA to aid with understanding the Rules of Origin and providing templates to demonstrate and assist in ensuring compliance.

Please contact Rupert Moyle in our VAT and Duty team to discuss in further detail.