Post-Brexit VAT / Customs

Post-Brexit trading arrangements are governed by The Trade and Co-operation Agreement (TCA) between the UK and the EU member states (known as the EU27).  The TCA is a “free trade agreement” (FTA) and mainly deals with customs duties relaxations between the UK and the EU, rather than with post-Brexit VAT arrangements.

Article 15 of the TCA under Title 1,  Chapter 1 “National treatment and market access for goods” states that the objective is to facilitate trade in goods between the Parties and to maintain liberalised trade in goods….”.  Articles 16 to 122 then deal with the details of the trade in goods including the “rules of origin”.  Article 120 states the Parties’ intentions to maintain administrative co-operation in the field of VAT and mutual assistance in recovering taxes and duties.  Beyond this there is not much detail on VAT as the intention is to leave tax matters to the UK and EU27 to decide independently.  Title 2 of the TCA deals with “Services and Investment”.  Title 3 deals with “Digital trade” and so on.

Regarding the trade in goods the intention is that tariffs (customs duty) and quotas should not generally apply as long as the rules of origin are respected.  This means that goods moving from the UK to the EU27 must have their origin in the UK in order to be customs duty free.  The same applies to goods moving from the EU27 to the UK.  In order to gain origin the goods must be “wholly obtained” (e.g. agricultural products) or “substantially worked or processed”  (e.g. raw leather hides imported and converted into bags).  However, goods imported from say Asia into the UK and then have labels stuck on them before export to the EU will not meet the UK rules of origin requirements and may be subject to customs duty charges on import into the EU.