New paperwork and tax rules frustrate traders post-Brexit

Brexit | | MIC Customs Solutions |

The first month of post-Brexit trading between the EU and UK has revealed widespread frustration and confusion with new paperwork and costs for imports and exports.

Businesses and individuals importing and exporting goods between the UK and the EU have been frustrated by unexpected tax demands, increased paperwork and complex rule of origin requirements in the first weeks of the new post-Brexit trading environment.

Since the transition period ended at midnight on January 1st 2020, a range of issues have been experienced by companies on both sides. While some of these can be put down to teething troubles, business groups have warned there is still a need for further agreements between Wetsminster and Brussels to ease new burdens and ensure trade is not disrupted.

Red tape leads to confusion

A major issue has been the amount of new paperwork firms moving goods between the UK and EU are now expected to provide, and the associated costs that go along with this.

For example, rule of origin requirements have had a significant impact on firms that frequently move goods back and forth across the English Channel, as well as those that ship goods made outside the UK into Europe.

This means, for instance, that firms that import goods from the EU, then ship them to other EU countries may face additional charges depending on how much processing or additional manufacturing is performed. As a result, there is widespread confusion about which goods will be subject to tariffs. This an issue that's particularly affecting exports to the Republic of Ireland, many of which are stored in the UK.

To avoid these problems, it's even been reported by the Observer that UK officials are advising British businesses to set up subsidiary operations in the EU, which would allow them to distribute goods throughout the bloc without worrying about the red tape.

Small firms working on small profit margins are said to have been especially hard hit by this. Of the six million less-sizeable enterprises in the UK, around a quarter trade with the EU, and many are said to be rethinking their options.

Chairman of the UK's Federation of Small Businesses (FSB) Mark Cherry said: "Increasing numbers of small firms are telling us that the uphill climb of managing new EU trade obligations could put them off exporting altogether."

However, it is not only small firms that are struggling to meet new demands. Big brands including Marks and Spencer and Debenhams have also encountered difficulties getting goods to Europe.

Even within the UK, new requirements for customs checks on goods crossing the Irish Sea have caused shortages at supermarkets in Northern Ireland. Amazon has also halted sales of goods such as alcohol in the region, due to fears it would end up paying certain duties twice.

Buyers surprised by new tax requirements

Another issue is how tax is collected for cross-border transactions, which is affecting individual buyers as well as business importers. Firms sending goods into the UK from the EU now have to fill out customs declaration forms, while shoppers may also have to pay customs duties and VAT, depending on the value of the product and its origin. 

As these are the responsibility of the customer rather than the retailer, many UK consumers have found themselves having to pay unexpected fees to couriers to receive their goods. BBC News found examples such as a demand for £58 in customs duties, VAT and additional charges for a £180 clothing order.

Several EU firms have therefore opted to stop doing business with UK customers altogether rather than deal with the prospect of more paperwork by registering for UK VAT collection, or face the risk of goods being returned by unhappy buyers.

Businesses warn of more delays

These are just a couple of the issues that have led to many companies facing a highly uncertain trading environment. As a result, some of the UK's leading business groups have warned of "substantial difficulties" at UK ports of entry due to delays and a lack of clarity from the UK government.

The Confederation of British Industry, the British Chambers of Commerce, Make UK, the FSB and the Institute of Directors added the situation is only likely to deteriorate further in the coming months, as grace periods implemented to ease the transition expire and the volume of trade increases in the spring and summer.

Data has also suggested that goods traffic across the English Channel in January is 30 per cent down on normal levels, with up to 65 per cent of trucks going from the UK to France empty. Meanwhile only one in ten export health certificates, which are now required for food products, were completed correctly.