March 2019 is quickly approaching and UK businesses are still largely in the dark about how customs procedures will be carried out in the event of a no-deal Brexit. In response, Her Majesty's Revenue and Customs (HMRC) published an updated  partnership pack to provide guidance and support for businesses preparing for day one if the UK leaves the EU without a deal.

For the time being, the pack outlines high-level customs procedures and the ways in which processes will be changed for goods moving across the UK border. Later in the autumn, the HMRC will expand the pack to include a breakdown of agrifood regulations, controlled goods (such as timber, chemicals, and waste) regulations and licensing, and road haulage licensing.

Customs and excise changes

Currently, goods are moved across the borders of the EU member states freely. In terms of customs, this means that UK businesses that trade with the EU do not have to make any customs import or export declarations. Therefore, these businesses do not pay any import duty. Additionally, the excise duty on goods such as alcohol, tobacco, and oils is waived within the EU.

If the UK left the EU without a deal, the free circulation of goods between the UK and EU would end. In preparation for such a situation, HMRC introduced the Customs Declaration Service (CDS) as part of the partnership pack, which would replace its Customs Handling of Import and Export Freight (CHIEF) system. Essentially, the goods that currently move freely between the UK and the EU without import or excise duties will acquire the same customs and excise rules that are currently applied to goods moving between the UK and countries outside of the EU.

No-deal impact mitigation

The purpose of publishing the updated partnership pack is to give UK businesses time to prepare for the upcoming increased shipping costs and supply chain changes to the best of their abilities. Additional import and export declarations could not only financially hurt UK businesses, but the country’s borders do not currently have the infrastructure to handle such a massive influx of data and regulation.

One of the ways the HMRC hopes to mitigate the impact of such a change on businesses in the event of a no-deal Brexit is by maintaining the backbone of the VAT system, which will provide certainty and continuity for businesses. Though there will be some specific changes, which you can read about in the HMRC guidance release, the HMRC aims to keep VAT procedures that relate to domestic transactions as close as possible to what they are now.

The document notes that a no-deal scenario remains unlikely, since both the EU and the UK have a mutual interest in positive negotiation, but that goes on to add that “it’s our duty as a responsible government to prepare for all eventualities, including ‘no deal,’ until we can be certain of the outcome of those negotiations.”

If you’d like to learn more about the partnership pack, visit UK Government Guidance page.