Brexit: Transport and logistics businesses must follow HMRC’s advice and prepare for the worst

By Sean Turner, a transport and logistics specialist at accountancy firm, Menzies LLP.  

Facing a high level of Brexit uncertainty, HMRC has issued more new guidance to help transport and logistics businesses prepare for a ‘no deal’ scenario. 

Despite the fast-developing situation, it is essential that transport and logistics businesses continue to plan ahead. In particular, they must give careful thought to the Government’s three key areas of advice to assist with their overseas trading.

According to estimates, annual customs declarations will increase by around 200m after Brexit, with some 145,000 businesses being required to submit declarations for the first time. With this in mind, HMRC has stepped up its advice issued earlier this year; advising all UK VAT-registered businesses that only trade in goods with the EU on what they should be doing to prepare for the possibility of a no-deal Brexit scenario. 

While previously a lack of information about the UK’s trading position may have prevented businesses in the sector from investing in mitigation strategies, it is essential that they recognise that the Brexit deadline is approaching and prepare for the worst. 

HMRC is recommending businesses in the sector obtain an Economic Operator Registration and Identification (EORI) number, which is made up of the company’s VAT number plus a three-digit suffix. Should a no-deal scenario occur, this number is likely to be required to continue importing and exporting with EU member states as well as to apply for specific customs authorisations. Requiring businesses to complete a simple online form via HMRC’s website, it is worth bearing in mind that an EORI number may be required even if a Brexit deal is agreed. Securing this now may help to ensure overseas trading activities continue with minimum disruption. 

HMRC’s advice also emphasises the importance of transport and logistics businesses taking a carefully planned approach to making customs declarations. Whereas, until now, traders have enjoyed the free movement of goods within the EU, after Brexit, VAT-registered businesses will have to navigate the complex process of making customs declarations. This can either be done in house, using specialist software, or by engaging a third-party customs broker. 

Whichever approach organisations decide to take, preparations should be made now to ensure declarations can be made from 29 March 2019. For example, contacting software providers now will allow businesses to determine whether their current processes are fit for purpose – a decision which will depend partly on whether import or export declarations, or both, need to be made. Moreover, it’s important to check whether a broker/agent requires any specific information, or additional training to fulfil any new requirements, which will likely have time and cost implications.

The final guidance note provided by HMRC relates to any additional information required for completing safety and security declarations. As local tax authorities conduct a series of checks on imported goods, it is important to have a good understanding of all the information required. This may involve checking what information is needed with the party moving goods on the business’ behalf. Alternatively, the business may be required to provide this information directly.

In addition to following this latest guidance, businesses in the sector should prepare for a no-deal Brexit by mapping out a number of supply-chain scenarios, as well as taking steps to strengthen their cash-flow position. To help minimise disruption to import and export activities, this should involve looking at whether a bank guarantee is required to be in place for customs procedures and calculating the potential duty bill that may need to be paid. Organisations completing customs declarations for the first time should also be aware that HMRC is granting funding for training and software improvements, which could help to offset the cost of this investment. 

To help set themselves apart from competitors after Brexit, traders in goods should consider gaining Authorised Economic Operator (AEO) certification, which reassures suppliers and customers that they have robust and reliable processes in place to deal with customs arrangements. However, this may be a lengthy and costly process and by no means solves the Brexit problem. It is also important to be aware that the current Customs Handling of Import and Export Freight (CHIEF) system is due to be replaced by the Customs Declaration Service (CDS) in early 2019. This has led to the introduction of a new trade tariff.

Transport and logistics businesses that have not yet given thought to their Brexit strategy have left things a little late. However, with the UK’s future trading relationship with the EU still in a state of flux, it makes sense to follow HMRC’s latest guidance. Taking this approach now could leave businesses in a better position to streamline processes and set themselves apart from competitors if the worst happens.