re:TRADE BLOG

Insights into supply chain & VAT optimization.

Published: 7 Mar 2022

Why UK companies are paying record customs fees – and how to manage the challenge

Many UK traders have been deferring customs declarations for 175 days when exporting to the EU. However, that option is no longer available. Businesses urgently need smart, personalised VAT and customs solutions to simplify trade and reduce the cost of doing business.
custom fees

UK customs duties paid by UK companies increased 64% in 2022, compared to the previous year. Reports suggest that the increase could be linked to the administrative complexity of trade under the Brexit deal. 

City A.M. reports that UK businesses paid £4.5 billion in customs duties in the 12 months to 31 January 2022. In the previous 12-month period, businesses paid £2.9 billion. According to the report, the increase is likely related to the number of businesses that chose to defer their customs payments to help  manage the increased cost and complexity of trade after Brexit. 

However, as of 1 January 2022, importers no longer have the option to defer their customs declaration for 175 days. However, businesses may still apply to use a simplified customs declaration at the point of entry and provide a supplementary customs submission within a month.   

Rules of Origin: Who are they helping?

In order to free up cash flow and make trade more efficient, importers should use all the advanced VAT and customs tools at their disposal, such as postponing import VAT.

However, in the best case, trade between the UK and EU should not be subject to customs duties at all. Under the EU-UK Trade and Cooperation Agreement, trade is not subject to customs duties if the Rules of Origin can be proved. 

In brief, to comply with RoO, traders simply need to demonstrate that the goods in question originate from within the UK or EU. Unfortunately, the practical reality is extremely complex

Customs duties: hard to avoid in practice

Different RoO criteria apply to different types of goods and it can be hard to determine whether goods qualify at all. (For example 55% of the final value of a motor vehicle needs to be made from originating parts to qualify.

But in the case of electric vehicles, the imported battery may already comprise 50% of the value of the car. Different rules apply to other types of manufactured goods.) 

Moreover, actually presenting the relevant supporting paperwork adds another layer of complexity. 

How to secure the best terms of trade

Rules of Origin, deferred import VAT, supplementary declarations. Following Brexit, trade between the UK and EU is subject to complex, time-consuming and often very costly paperwork. 

Fortunately, there’s a complete end-to-end trade solution, customisable to any business.

re:TRADE, powered by VAT IT, is a complete supply chain solution. We provide full clarity and support on everything from import VAT, to customs procedures and logistics. Ensure your goods always get to your customers, as efficiently and affordably as possible. Get in touch with re:TRADE to secure much better terms of trade for your business. 

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