Brexit and the implications for ecommerce - SwiftERM

Brexit and the implications for ecommerce. Brexit is on agendas across the country and the main cause for concern is the ongoing uncertainty surrounding it, for whilst uncertainty remains, it’s hard to plan ahead. Still, everyone wants to know: how will Brexit impact UK trade?

For the UK ecommerce and logistics market, the focus is on the movement of goods to EU countries. Here we collate some of the potential implications of different Brexit scenarios including information on importing, exporting, VAT, customs and duties, and how processes may change when we leave the EU.

Although no one can currently be sure what kind of Brexit the UK will get, it is worth keeping these variables and implications in mind. None of this should be taken as legal advice but, as Brexit talks progress, it may be wise to start assessing how they may impact your business and if your partners and suppliers have started thinking about them too.

Implications of Brexit in a no-deal scenario

High-level implications for the UK in a no-deal scenario:

The UK becomes a third country whose relations with the EU would be governed by general international public law, including rules of the World Trade Organisation (WTO). The WTO deals with the global rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible.

The European Union must apply its regulation and tariffs at borders with the UK as a third country, including checks and controls for customs, sanitary and phytosanitary standards (to protect humans, animals, and plants from diseases, pests, or contaminants that may enter an EU state), and verification of compliance with EU norms.

Transport between the UK and the EU would be impacted and sanitary and phytosanitary controls at borders could cause significant customs delays through difficulties at ports and longer road transport times.

Depending on the circumstances leading to withdrawal without an agreement, the EU may wish to enter into negotiations with the UK as a third country.

Implications for UK businesses:

If the UK leaves the EU without a deal we will become a third country, with no preferential deal for customs purposes or for VAT. Duties and taxes will be payable on all goods and shipping times may vary depending on customs clearance.

Licenses and approvals issued by the UK will no longer be recognised by the EU.

Companies based in the UK can no longer operate in the EU as a member state and need to establish a representative in an EU country.

The UK stops being part of EU systems. Access to these systems would need to be renegotiated as a third country.

Printed matter including catalogues and direct mail may be impacted. If airports and ports are open there should be no change to how this mail is distributed, via post, to the EU. However, if goods traffic is held at ports, tunnels and airports, then mail could also be held up with it.

UK companies will have to change the way they manage data transfers, such as consumer data for shipping-labels if the data originates from businesses within the EU. Further information can be found on the ICO website.

What customs arrangements do we currently get as part of the EU?

The current customs arrangements allow businesses to move goods freely between EU member states. For customs, this means that businesses trading with the rest of the EU do not have to make any customs import or export declarations. Trade with the EU is not subject to import duty.

Certain goods are subject to excise duty. These goods are currently free to move between the UK and the rest of the EU with excise duty suspended. The three categories of excise goods that can be held in an excise warehouse in duty-suspension are:

  1. Alcohol products including beers, wines and spirits.
  2. Tobacco products including cigarettes, cigars and loose tobacco.
  3. Energy products including hydrocarbon oils and biofuels for use as motor or heating fuel.

The government has negotiated to remain in the Common Transit Convention after Brexit to facilitate cross-border movements of goods between contracting parties to the Convention. This will reduce admin activity required by traders. For example, any payment charges due on goods will only be required in their destination country. This should partially mitigate some consequences for the travel of non-EU goods within the EU in the event of a no-deal Brexit.


What are the current VAT and duties arrangements for goods travelling to the EU?

VAT is payable by businesses when they bring goods into the UK. There are different rules depending on whether the goods come from an EU or non-EU country.

Goods that are exported by UK businesses to non-EU countries and EU businesses are zero-rated, meaning that UK VAT is not charged at the point of sale.

Goods that are exported by UK businesses to EU consumers have either the UK or EU VAT charged, subject to distance selling thresholds.

For services, the ‘place of supply’ rules determines the country in which you need to charge and account for VAT.

What will a no-deal scenario mean for customs arrangements of goods?


Trade with friction

The same customs and excise rules for goods moving between the UK and the non-EU countries will apply to goods moving between the UK and EU. Import and export declarations will also be required. 

Carrier declarations

Carrier declarations will be required for the safety and security of goods.

Excise goods

The Excise Movement Control System (EMCS) would no longer be used to control suspended movements between the EU and the UK, so the aforementioned excise goods would no longer enjoy duty-suspended movement.

Importation for EU

Goods entering the UK from the EU will require import declarations. Customs checks may be carried out and any customs duties must be paid.

Companies must register for a UK Economic Operator Registration and Identification (EORI) number to be used on customs declarations by freight forwarders and couriers and accurate classification on imported material will be needed.

Arrangements will need to be made with Brokerage and Freight Forwarding companies to get goods to the point of final distribution.

Exporting from the UK

Businesses must register for a UK EORI number to export, and contracts and International Terms and Conditions of Service (INCOTERMS) must be amended to reflect that your business is now an exporter.

Export declarations and safety and security declarations will be required.

Brexit Implications for ecommerce


What will a no-deal scenario mean for VAT and duties arrangements for goods?

VAT imports

Postponed accounting will need to be introduced for import VAT on goods brought into the UK. UK VAT registered businesses importing goods to the UK will be able to account for import VAT on their VAT return, rather than paying import VAT on, or soon after, the time that the goods arrive at the UK border.

VAT on goods entering the UK as parcels

If the UK leaves the EU without an agreement, then Low-Value Consignment Relief (LVCR) will no longer apply to any parcels arriving in the UK. This aligns the UK with the global direction of travel on LVCR. This means that all goods entering the UK, as parcels sent by overseas businesses, will be liable for VAT.

Overseas businesses will charge VAT at the point of purchase and will be expected to register with an HM Revenue & Customs (HMRC) digital service and account for the VAT due.

VAT on exported goods

If the UK leaves the EU without an agreement, VAT registered UK businesses will continue to be able to zero-rate sales of goods to EU businesses but will not be required to complete EU sales lists.

Current EU rules would mean that EU member states will treat goods entering the EU from the UK in the same way as goods entering from other non-EU countries. Associated import VAT and customs duties would be due when the goods arrive in the EU.

What are the implications of the EU accepting a government deal?

If a deal, similar to that already constructed by the UK Government, were to be accepted by both Parliament and the EU, there would be a few different implications to consider.

As of the 30th March 2019, the UK no longer participates in EU decision-making, EU institutions, and governance of EU bodies and agencies.

The role of EU institutions in the supervision and enforcement of EU law in the UK would continue throughout the transition period.

The EU would need to negotiate with the UK an agreement on their future relationship, which should ideally be in place (agreed, signed and ratified) at the end of the transition period and apply as from 1st January 2021.

UK businesses would have some planning time as there would be no immediate impact on customs procedures and the ability to import and export within the EU. There would also be no changes to customs declarations.

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