Managing the Brexit deal for your business
Now that the UK has left the EU, there are new rules in place from 1st January 2021. Here at OrderWise, we understand that, despite a deal having been agreed, businesses have many areas of operations to consider under these new trading legislations, now and as they evolve.
Keeping alert to these ongoing requirements, our team is continuing to gather information from our partners to ensure OrderWise software is fully prepared for all the emerging needs of businesses.
What do the results of the Brexit deal mean for businesses?
As part of the Brexit deal, businesses moving goods between the UK and the EU will be subject to new VAT and customs obligations when cross-border trading.
Though the Trade and Cooperation Agreement has enabled tariff and quota-free trade on goods, import VAT rules will feature heavily for businesses and some could be ‘stung’ with double taxation if they continue to import goods into the UK before selling to the EU.
To help businesses navigate this time of transition, here is a breakdown of all the new factors to consider when cross-border trading, and how to manage these for your business within OrderWise.
Exporting and Importing
There is new information that businesses will need to display for every cross-border movement of goods.
Country of Manufacture
For goods to clear customs smoothly, most couriers have now made it mandatory for the country of Manufacture to be displayed on outgoing labels.
This can be set against variants in OrderWise by selecting Variant > Detail > Import/Export Details.
Harmonisation Code (Commodity Code)
A harmonisation code, also known as a ‘tariff number’, ‘commodity code’ or ‘HS (Harmonised System) code’, is an internationally accepted protocol for identifying goods. Now, for goods travelling between the UK and the EU, it is a customs tariff code that makes up a key element of any customs declaration. Essential to clearing customs, most couriers have made it mandatory to set harmonisation codes against your stock items.
The harmonisation code can be set against items in OrderWise by selecting Variant > Detail > Import/Export Details.
Business moving goods between the UK and the EU will need to register for an EORI number (Economic Operators Registration and Identification number), which will need to be included on all outgoing packages/items to clear customs and avoid delays and additional charges.
For moving goods between Northern Ireland and non-EU countries (including the UK), or when making a declaration or receiving a customs decision in Northern Ireland, you must have an EORI number that begins with ‘XI’.
To get an ‘XI’ EORI number your business must already have an EORI number that starts with GB.
For more information on EORI and ‘XI’ EORI numbers, as well as to complete an application, please visit https://www.gov.uk/eori
Using your EORI or ‘XI’ EORI number with OrderWise:
- A company can register their EORI or ‘XI’ EORI number within a new field, located within System > Company Info > EORI number
- There is also now the option to set your EORI number against individual couriers, which is useful when using multiple couriers or multiple points of dispatch. You can do so by accessing System > Despatch > Couriers > Shipper Details (from within the courier record) > EORI no.
For Northern Ireland
As well as the ‘XI’ EORI number, further rules now apply to business being conducted into and out of Northern Ireland for any of the following transactions:
- When goods are located in Northern Ireland at the time of sale
- When goods are supplied B2B in Northern Ireland by VAT-registered EU businesses
- When a sale or movement goods takes place from Northern Ireland to the EU
Trade rules into and out of Northern Ireland can be complicated depending on the circumstances. We have aimed to cover the basics, but you can gain further advice on Northern Ireland trade here at Avalara.com and Gov.uk.
Accounting and Commercial Invoicing
The way you operate your accounts for cross-border imports and exports may need to change.
VAT and overseas goods
VAT for exports to the wider world remain unchanged
Exports to the rest of the world outside of the EU remain unchanged from pre-Brexit arrangements. However, imports into the UK will now follow a £135 net threshold.
When sold directly to customers in the UK
The £135 net threshold rule
For any consignments of goods valued at £135 or less, the import VAT and marketplace liability rules from the UK’s HMRC requires ecommerce sellers, or their facilitating marketplaces, to charge VAT at the point of sale on imports instead of paying import VAT. At the same time, the VAT exemption on parcels under £15 has been removed. Plus, Digital sellers will need extra VAT MOSS (Mini One Stop Shop) registrations too.
The £135 limit applies to the value of a total consignment that is imported, not the separate value of individual items that are in a consignment.
For consignments valued at more than £135, normal VAT and customs rules will apply on goods imported into Great Britain from outside the UK, or into Northern Ireland from outside the UK and the EU. In this case, businesses can apply a system of Postponed VAT Accounting.
Postponed VAT Accounting
VAT has become payable on all imports coming into the UK if they are over £135 in value, and this includes imports from EU countries, meaning many businesses will be hit by an extra tax bill.
The postponed VAT accounting system aims to avoid the impact of negative cash flow on the affected businesses and also minimise any mounting delays and costs of having goods held at the border until the outstanding VAT is paid.
How does postponed VAT accounting work?
The system is similar to the reverse charge mechanism used for trading with the European Union before Brexit. Postponed VAT accounting allows you to declare and recover import VAT on the same VAT return, Instead of having to pay it upfront and recover it later. As a result, the importer can avoid physical payment.
The system can be applied to all goods imported into the UK, apart from controlled goods.
To use postponed VAT, the input tax should be posted to Box one and the reclaimed tax to Box four, with the net value of the imports added to Box seven.
For more information about Postponed VAT Accounting, you can visit gov.uk.
There are two ways in which duty can be paid:
Delivery Duty Paid (DDP)
The Delivery Duty Paid (DDP) option is where your business covers the duty charges on your customer sales orders, rather than the end consumer themselves.
However, to cover the duty charges as a business, you’ll need to be VAT registered in the country of delivery beforehand and apply that country’s VAT rates.
Delivery At Place (DAP)
The default for most couriers, Delivery At Place (DAP) is where Duty is paid by the end consumer upon arrival. As a result, this method does not require you to be VAT registered in the country of delivery.
Commercial Invoicing – how it works with OrderWise
To help our customers with these new import and export requirements for the invoices, we’ve made some changes in OrderWise.
As some couriers do not have an integrated Commercial Invoice for the new regulations, we have updated our OrderWise Commercial Invoicing to include EORI numbers and a new totals table.
Multiple EORI numbers
If you need to show both EORI and XI EORI, there are a few options for your business that we can develop:
- Your business can include both as a static statement on the layout.
- Your business can create new custom rules in OrderWise, which will determine when to show the EORI or the XI EORI. For example, if the country code begins with GB, or the postcode shows a ‘XI’ EORI will be required.
Our Support team can help you decide which option would be best for your requirements and assist in the custom implementation.
Where you wish to display incoterms on your Commercial Invoice, they can be indicated by adding a static statement. If you have multiple incoterms that need displaying, you can contact our Customer Success team and create a custom development for your requirements.
To ensure all your courier transactions can continue to flow as smoothly as ever, OrderWise has provided Brexit-specific updates to the following courier integrations:
- Advanced – DPD API Domestic Direct Feed
- Advanced – DPD API International Direct Feed
- Advanced – DPD Local API Domestic Direct Feed
- Advanced – DPD Local API International Direct Feed
- Advanced – Netdespatch Yodel – International Direct Feed
- B2C Europe – International Direct Feed
- DHL API – International Direct Feed
- DPD Ireland API – International Direct Feed
- DPD Ship To Shop API – International Direct Feed
- FedEx International – Web Service
- Gfs Enterprise API – International Direct Feed
- Hermes API International Direct Feed
- Parcelforce Expresslink – Web Service
- Royal Mail API – Intersoft
- Ups Worldship International Direct Feed
- Whistl – International Direct Feed
Is your Courier integration not on the list?
Let us know today
We are updating all our courier integrations as soon as we can obtain the right information from each of our respective couriers. If your business requires updates to a courier integration that is not listed, please let us know here, and have the details ready for your courier contact who can access the couriers’ latest technical documentation. We can then update the integration accordingly in OrderWise.
You can find more information at the following locations:
- https://www.gov.uk/transition – The Government website containing comprehensive information on Brexit.
- https://www.avalara.com/vatlive/en/vat-knowledge/brexit.html – Avalara are a team of dedicated tax experts with an extensive information portal on Brexit.