Trade with the EU

The UK is outside the single market and customs union since 1 January 2021. The Free Trade Agreement has introduced changes to trading in all goods and services with the EU. This includes digital services, for which we have provided a separate note, Intellectual Property (IP) and EU Data.

Since 1 January 2021, UK businesses trade with the EU on the basis of the terms agreed under the Free Trade Agreement. If you import or export, whether this is goods or services, you are advised to prepare for the customs procedures, and to check if you need a representative in the EU.

All goods and services traded with the EU will be affected. This guide note explains how you can:

  • Trade legally with the EU following the enforcement of the Free Trade Agreement
  • Comply with the trade in goods and services provisions under the Free Trade Agreement
  • Tax and tariffs under the Free Trade Agreement

Quick Checklist

Trade legally with the EU following the enforcement of the Free Trade Agreement

The UK is  now out of the single market and customs union. The terms of the Free Trade Agreement apply to trading in goods or services with the EU from 1 January 2021. Some service providers will need an EU presence. Following the end of the transition period, you will not be able to freely provide goods or services, and some barriers to your business can be expected.

You should:

  • Understand what the new rules will mean for your business activity by using the Government Brexit checker tool and the EU Readiness Notices.
  • Talk to investors/funders and insurers to ensure financial support and cover is sufficient and remains valid.
  • Check and brief your team which should include representatives from all the impacted business functions including supply chain, procurement, HR, legal and IT. Ensure representatives are senior enough to make quick decisions.
  • Communicate with your priority customers and suppliers on any expected Brexit impacts on your business in light of the Free Trade Agreement and understand their positions. Appoint appropriate contact points within your business for those customers and suppliers which can be reached over the coming days.
  • Closely monitor the impact of Brexit on your cost base. Prepare to reassess operations which may become unprofitable and quickly revise your pricing models.
  • Collate a priority checklist of regulatory requirements (including registrations, labelling and markings) required for shipments of products. Be aware of the risks of non-compliance and implement changes needed.
  • If trading with Northern Ireland – register on the TSS Trader Support Service (https://www.gov.uk/guidance/trader-support-service).
  • If trading with Northern Ireland – ensure you have an XI EORI number. You cannot trade with NI without one (https://www.gov.uk/eori).
  • Engage with relevant government bodies and trade professionals for any additional support and guidance.
  • Check your contracts for both goods and services with buyers or suppliers in the EU. See what they have done at their end to make sure they can carry out their side of any contract. See if any of your contract terms need amending, for example, who will pay for increased costs of customs procedures and completion of customs declarations. Make sure the territorial scope of the contract is correct, stating the UK as a non-EU country.
  • Any legal actions or lawsuits currently in the EU courts will remain there until decided. From 1 January 2021 you should check your contracts so that you know which law applies and which court will have jurisdiction.
  • If you have a presence in the EU, check it complies with the national company law and/or professional rules in the local country.
  • For exporting goods, you will need, at the very least, to comply with EU product rules, obtain any necessary import or export licences, and apply for access to Customs Handling of Import and Export Freight (CHIEF).
  • You must also consider any other steps such as labelling your products, obtaining licences, and identifying an approved UK border inspection post. Find out about the local rules in your customer’s country for both goods and services.
  • For services, it is vital to consider your professional qualifications, licences and authorisations, as there is no mutual recognition of professional qualifications under the new Free Trade Agreement.
  • You will need to comply with UK accounting and reporting requirements from 2021. All companies must use ‘UK adopted IAS (International Accounting Standards) instead of ‘EU adopted IAS for financial years beginning after the 1 January 2021. Fortunately, both sets of standards have not changed. They may do in future.
  • You should check for specific paperwork and other requirements when sending packages or parcels via a courier to your EU customers, suppliers or other EU based parties.

Comply with the trade in goods and services provisions under the Free Trade Agreement

Tax and tariffs under the Free Trade Agreement

Doing business with the EU following the end of the transition period will attract paperwork and potential increased costs:

There will be no tariffs or quotas for goods traded between the UK and EU.  However, this is accompanied by a number of new customs procedures and formalities, including completing and submitting customs declarations, new ‘rules of origin’ requirements, which are needed in order to qualify for the tariff-free, quota-free treatment.  Where goods are not ‘mostly originating’ from the UK or EU (e.g. goods transiting through the UK or the EU) or where they are not ‘wholly obtained’ from the UK or the EU (e.g. where they are made from the materials produced outside of the UK or the EU), tariffs will be payable.

You should:

  • Apply for postponed VAT accounting – this allows you to defer paying VAT upon importation of goods. Instead your import VAT will be paid on your usual VAT return (https://www.gov.uk/guidance/check-when-you-can-account-for-import-vat-on).
  • Exporters of products from the UK to the EU should apply for relevant EORI (Economic Operator Registration and Identification) numbers/VAT registrations in Great Britain, EU and Northern Ireland or confirm the status of these applications. These will be crucial to being able to complete the necessary customs procedures and declarations. You cannot trade with the EU if you do not have an EORI number (https://www.gov.uk/eori). 
  • Apply for a Duty Deferment Account – this will allow you to defer paying your import duty and duty can be paid once a month rather than every time you import your goods. Currently HMRC has waived the need to put up a Customs Comprehensive Guarantee and, if you qualify, will give you a £10,000 credit limit per month. More information can be found here.
  • Check your commodity codes. You need to ensure you are using the correct Commodity Code for your goods. There are many implications such as financial or criminal penalties if you are using the wrong codes. Businesses can check here. 
  • Check whether import duty may be payable on your goods after 1st January 2021 if importing goods from the EU.
  • Prepare for customs procedures and check if you need a representative in the EU. Think about how to complete and submit export / import declarations, – if your goods can move through common transit countries (Common Transit Convention or CTC).
  • Calculate the duty rates or excise duties that you will need to pay for imports and exports, if any. You can set up a duty deferment account with regular imports.

Further support

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