Brexit took effect on the first of January 2021, marking the United Kingdom’s official exit from the European Union. This impacts the import of goods into the UK and like many other individuals and companies that ship products to the UK, we faced a lack of clear information about what this means for the process and fees associated with exporting goods to our amazing UK customers. Our team started their research to its impact well before Brexit took effect, and we want to share some of the information and details we’ve uncovered for our customers in the UK and beyond.
If you’re in the UK and had to pay import fees to receive your package from the EU, or heard of a UK customer encountering unexpected fees or delays in receiving their products, we hope this information is helpful.
So, what’s going on in the UK right now, and why are so many shipments experiencing delays or incurring additional fees?
- Since Brexit on January 2021, import VAT, clearance fees and possible tariffs apply on shipments from outside the United Kingdom;
- If you don’t organise/register for postponed VAT, this VAT will be charged on import. Companies may reclaim this VAT at their tax filing;
- Clearance fees are a small administrative fee. They are paid on top of the import VAT at clearance of the goods;
- Tariffs don’t apply on OnLogic’s computer hardware systems;
- Shipping delays may occur due to heavy loads at the UK customs facilities.
How did importing to the UK work prior to Brexit?
When the United Kingdom was still in the European Union, trading between the UK and other union members took place in the form of Intra-Community transactions. These are trades from one EU country to another, to which 0% VAT was applied. Businesses within the EU are obligated to report their Intra-Community transactions to their local country’s tax authorities. These would charge or refund companies the applicable local VAT rates. No VAT had to be charged at the time of import – at customs – as the goods were shipped within the EU.
What changed with importing from one EU country to the UK after Brexit?
Now that the United Kingdom is no longer an EU member, trading with it from the union is considered a “regular” international transaction. This means that packages go through UK customs as any other international shipment outside of the EU would. Taxes and tariffs are applied upon the parcel entering the country. The result is that under the usual DAP shipping agreement, the receiving party will get billed for any cost that is incurred when importing the goods. This is usually the sum of:
- UK VAT – also known as Import Taxes, which is 20% on OnLogic’s Computer Systems
- Tariffs, if applicable (you can look up the HTS code and applicable rates here)
- Clearance fees – charged by a customs broker that will check and release goods
You are a business in the United Kingdom and have purchased a couple of industrial computers from OnLogic. You will receive an invoice for the computers at 0% VAT from OnLogic. When the goods arrive in the UK, you will be charged 20% VAT and a small clearance fee from customs. No Tariffs apply on our computer systems. You claim back the VAT at the HMRC.
Before Brexit, you would pay 0% VAT and no clearance fees. You would file the 0% VAT OnLogic invoice at the end of the financial quarter with the HMRC.
How can I reclaim VAT after the import of goods?
According to the UK government website, there are two ways to claim import VAT:
- Account for import VAT on your VAT return by using postponed VAT accounting; or
- Pay import VAT on importation and reclaim this as input tax subject to the normal rules
More information on these UK import VAT processes can be found on the website of the United Kingdom Government.
Is importing goods from the EU into the UK more expensive?
Importing goods into the United Kingdom in most cases isn’t much more expensive than before. Whether you source products locally, or from the EU – if the goods have no tariffs, you would have to pay VAT regardless. The only added cost with importing goods that have no tariffs are the clearance fees. Customs and customs brokers will have to charge a small fee for their administrative services. This is usually a relatively small standard fee.
You are looking to purchase two industrial computers. You are considering a local UK supplier and a supplier in the EU. The two systems in the UK are £1200, £600 each including 20% VAT. The systems from the EU supplier are £1000, £500 each at 0% VAT. In this latter case, you will be charged 20% VAT plus a clearance fee for handling and/or advancing it. Assuming this clearance fee is £12, the shipment from the EU will cost £1212 – a 1% higher total than buying from within the UK. For both orders, VAT can be offset against VAT received, thus claimed at tax filing.
What else should I know when exporting goods to the UK?
The information above pretty much covers all there is to shipping goods from the EU to the UK post-Brexit. However, there are more nuances when it comes to tariffs. Since the UK and EU reached a trade agreement at the end of 2020, there is something called “Preferential Origin” for the European Union. Product categories eligible for this preferential origin, would for the most part originate within the European Union and are free of any tariffs. You can look up under what conditions your product may be labeled as having Preferential Origin page 440 onward.
In the case of OnLogic’s hardware, as with the majority of computer systems, the majority of the components we use originate from Asia. This makes our hardware non-eligible for the EU preferential origin. Fortunately, no tariffs apply on our computer hardware and components to begin with, so only standard VAT applies.
A Note on Shipping delays
Another thing to keep in mind is the overwhelming load on UK customs after Brexit. Agents work very hard to keep up with all the clearances, but delays are inevitable. Carriers like UPS and their brokers are doing everything they can to meet expected delivery times. There may still be instances in which parcels from and to the United Kingdom are delayed. To prevent this, the best thing the shipping party can do is to ensure the proper documentation is attached to the shipment.
Who should I reach out to for questions?
Our team at OnLogic is happy to answer any questions you may have regarding importing our computer hardware into the UK. Keep in mind that this is an evolving situation that is new to everybody. We will do our best to solve any challenges together with you. You can reach our European team through email@example.com or by calling +44 (0)3300 104 290 (UK) or +31 (0)88 5200 700 (NL).