EU Exit frequently asked questions
We have put together the answers to the most common questions our customers and stakeholders have asked about the EU Exit period.
This section outlines the high-level information about data implications and the Northern Ireland Protocol. These are subject to change and will be updated as more information and clarity about the process becomes available, so do check back from time to time.
In the months leading up to the end of the transition period, it was anticipated that businesses based in the UK that were receiving or processing personal data from the EEA would have to put in place an additional transfer mechanism to continue receiving personal data from the EEA lawfully. This is because it was anticipated that the UK would become a ‘third country’ for the purposes of the EU GDPR in the absence of an adequacy decision.
However, on 24 December 2020, the EU and UK secured a trade deal under the Trade and Cooperation Agreement (TCA). The TCA includes a temporary 'bridging mechanism' for personal data which allows organisations to continue to send personal data from the EU to the UK until 30 June 2021. During this period, personal data can flow freely from the EU to the UK.
This gives organisations that had not addressed EU to UK data transfers some breathing space while the EU Commission continues its assessment of adequacy for the UK. During this extension, if you receive personal data from the EU you should still consider putting alternative safeguards in place as a sensible precaution.
To date there is nothing to suggest that data flows between ROI and NI will be treated any differently than data flows between the EEA and the UK generally. However, the Information Commissioner's Office (ICO) has stated that it will monitor the position and provide updates accordingly.
The bridging mechanism enables personal data to continue to flow from the EU to the UK without additional safeguards, for a period of up to 6 months. The bridging mechanism is in place for an initial period of 4 months (up to the end of April 2021) but will automatically be extended for a further 2 months unless the EU or UK object, or the UK has already received an adequacy decision by this point.
Under the TCA, the European Commission formally declared its intention to commence the adequacy decision process for the UK and to work closely with other bodies and institutions involved in the relevant decision-making procedure. The rationale for the bridging mechanism is to enable personal data transfers from the EU to the UK to continue freely until an adequacy decision is formally obtained.
During this extension period if you receive personal data from the EU you should still consider putting alternative safeguards in place as a sensible precaution.
An adequacy decision is a formal declaration by the EU Commission that another country outside of the EU offers an equivalent level of data protection to that provided in the EU (by virtue of the EU GDPR).
The UK is seeking adequacy decisions under both the General Data Protection Regulation (GDPR) and the Law Enforcement Directive (LED).
The effect of an adequacy decision is that personal data can be sent from an EEA state to a third country (i.e. UK) without an additional transfer mechanism being required. In other words, data transfers can continue in the same way as they did before EU Exit.
The process for obtaining an adequacy decision can be lengthy and involves a proposal from the EC, an opinion of the European Data Protection Board, approval from representatives of EU countries and the adoption of the decision by EU Commissioners.
It seems that the UK will have a strong case for obtaining an adequacy finding particularly because:
- the EU-UK Joint Declaration, published alongside the Trade and Cooperation Agreement (TCA), includes a political commitment from the EU to secure a favourable adequacy decision for the UK; and
- the UK has mirrored the EU GDPR in its domestic law (UK GDPR)
However, there are concerns that the UK’s surveillance powers under the Investigatory Powers Act 2016 could delay an adequacy decision being granted.
If the UK has not received an adequacy decision by the end of the bridging period, it will become a ‘third country’ for the EU GDPR. This will mean that personal data transfers from the EU to the UK will require additional transfer mechanisms to be put in place under Article 46 of the EU GDPR, such as:
- EU Standard Contractual Clauses (‘SCCs’); or
- Binding Corporate Rules.
If there is no applicable safeguard under Article 46, the next step will be for organisations to consider if one of the derogations under Article 49 could be relied upon. Organisations should be mindful that the derogations are only intended to apply in limited circumstances and specific advice should be obtained if reliance on a derogation is being considered. It is important to note that any derogations relied upon should be documented in organisations’ records of processing activities (under Article 32 of the UK GDPR).
The Information Commissioner's Office (ICO) advises organisations put additional safeguards in place by the end of April 2021 (if they have not already done so). This will ensure that organisations are GDPR compliant if the UK does not obtain an adequacy decision by the end of the bridging period or at all.
The Information Commissioner's Office (ICO) has confirmed that Standard Contractual Clauses (SCC) will likely be the only safeguard that small and medium-sized enterprises (SME) can rely upon if the UK does not obtain an adequacy decision. SCCs are sets of model clauses developed by the EU Commission that currently cover the following scenarios:
- data controller based in the EU transferring to a data processor based in a ‘third country’; and
- data controller based in the EU transferring to another data controller based in a ‘third country’.
The SCCs are in the process of being updated so that they will cover all transfer scenarios (e.g. EU processor to UK controller and EU processor to UK processor). It is hoped that the new SCCs will be published before the end of the bridging period.
Are additional safeguards, such as Standard Contractual Clauses (SCC), already put in place now meaningless?
Many organisations will have already devoted considerable time putting in place additional safeguards such as Standard Contractual Clauses (SCC). However, the Information Commissioner's Office (ICO) has stated that this was not time wasted as doing so was a “sensible precaution”.
Although the bridging mechanism shows both the EU’s and UK’s intention to reach an adequacy decision, this may take longer than six months meaning that an additional transfer mechanism would likely be required.
Furthermore, an additional safeguard is still required for transfers of personal data to the USA following the decision of the ECJ in Schrems II that the EU-US Privacy Shield is an invalid transfer mechanism.
Yes, the Information Commissioner's Office (ICO) guidance published about the EU GDPR remains relevant. This is because the principles of the EU GDPR have been incorporated into UK domestic law via the UK GDPR. Organisations should also keep up-to-date with any UK-GDPR specific guidance introduced by the ICO. The ICO’s consent guidance specifically refers to the UK GDPR.
The UK Government had previously confirmed that it would continue to recognise the EU-US Privacy Shield following the end of the transition period. However, the decision of the Court of Justice of the European Union (“CJEU”) in Schrems II has complicated the position by invalidating the EU-US Privacy Shield.
Therefore, to lawfully transfer personal data to the US, UK based organisations will need to ensure that they have an additional safeguard in place in accordance with Article 46 of the UK GDPR or failing that, can rely on a derogation under Article 49 of the UK GDPR.
Article 27 of the EU GDPR requires organisations not established in the EU that offer good or services to, or monitor the behaviour of, EU based individuals, to appoint an EU-based representative to:
- act as their point of contact for individuals and local data protection authorities;
- maintain records of the organisation's data processing activities; and
- make data processing records available to the Information Commissioner's Office (ICO)
Organisations will need to authorise the representative, in writing, to act on their behalf regarding their compliance with the EU GDPR. Details of an organisation’s representative must be provided to EEA-based individuals.
This arrangement is reciprocated under the UK GDPR meaning that an EU-based company without a subsidiary in the UK, targeting goods or services to people in the UK, will need to appoint a UK-based representative.
It is not necessary to appoint a local representative if:
- the organisation is a public authority; or
- the processing is only occasional, of low risk to the data protection rights of individuals, and does not involve special category or criminal offence data on a large scale.
My business is not directly targeting people (living in the EU), but my products are supplied to the EU market through, for example, an online retailer. Do we still need to appoint an EU representative?
If your business is not directly targeting the EU market, you do not need to appoint an EU representative. For example, a manufacturer of specialist tools who sells the tools in the EU but does not do direct marketing or process customer data relating to individuals in the EU, does not need to appoint a representative. However, if you plan to start direct marketing or marketing in trade publications in the EU, the need to appoint an EU representative would likely be triggered.
There are certain exemptions that can apply in relation to appointing a representative, for example, if the data processing is occasional and low risk. However, specific advice should be obtained if you are unsure whether you need to appoint a representative.
The EU GDPR will continue to apply to any personal data obtained or processed in the UK about non-UK data subjects before the end of the transition period (known as legacy data) until the UK obtains an adequacy decision (at which point it would become subject to the UK GDPR and DPA 2018).
Personal data about UK data subjects processed in the UK before the end of the transition period falls under the UK GDPR and DPA 2018 from the end of the transition period.
A business is trading under the NI Protocol if the business is VAT registered and either:
- Your goods are located in NI at the time of sale
- You receive goods in NI from VAT registered EU businesses for business purposes
- You sell or move goods from NI to an EU member state.
When trading under the NI Protocol, a business must use an “XI” prefix in front of their VAT number when communicating with an EU customer or supplier. A trader can check whether they're trading under the NI protocol and self-identify with HMRC using the same link.
Will there be customs duty payable on the movement of goods from the UK mainland to Northern Ireland?
There will be no customs duty or tariffs payable on goods coming into NI from the rest of the UK unless the goods are ‘at risk’ of being supplied into the EU market.
There has been a mention of ‘new tariffs’ in relation to imports now the European Union (EU) transition period has ended, what does this mean?
On the 19 May 2020, the UK Government announced the UK's new Most Favoured Nation (MFN) Tariff regime, UK Global Tariff (UKGT), would replace the EU's Common External Tariff on 1 January 2021. The UK Government has streamlined and simplified nearly 6,000 tariff lines, removed the EU’s Meaursing table and eliminated tariffs on a wide range of products.
Businesses in Northern Ireland must also refer to the NI/EU tariff for goods entering Northern Ireland that are “at risk”, as any tariffs that may be payable on these goods would be levied at the rate applied in the EU.
EU customs duties will apply to goods entering Northern Ireland from GB and non-EU countries if those goods are ‘at risk’ of entering the EU.
No customs duties will be payable, however, if goods entering Northern Ireland from GB are not ‘at risk’ of entering the EU's Single Market.
For goods entering Northern Ireland from third countries not considered to be ‘at risk’, the customs duties applicable in Northern Ireland will be the same as in the other parts of the UK.
Article 5(2) of the Northern Ireland Protocol states that goods will not be at risk if they:
(a) will not be subject to commercial processing in Northern Ireland; and
(b) fulfil the criteria established by the Joint Committee in accordance with the fourth subparagraph of this paragraph
The Joint Committee determination of goods not at risk was published on 17 December 2020. This defines what commercial processing is for the purposes of point (a) above and the further conditions that must be met under (b) above. Note that conditions (a) and (b) must both be met for goods to be considered not ‘at risk’.
Commercial processing is defined in Article 2 of the Joint Committee determination of goods not at risk.
Businesses with an annual turnover of less than £500,000 will not be subject to the commercial processing test. In addition, processing undertaken for the following purposes will not be considered as ‘commercial processing’ where the processing is in Northern Ireland and is for the sole purpose of:
- the sale of food to an end-consumer in the United Kingdom;
- construction where the processed goods form a permanent part of a structure that is constructed and located in Northern Ireland by the importer;
- direct provision to the recipient of health or care services by the importer in Northern Ireland;
- not-for-profit activities in Northern Ireland, where there is no subsequent sale of the processed good by the importer; or
- the final use of animal feed on premises located in Northern Ireland by the importer
The term ‘processing’ means any alteration of goods, any transformation of goods in any way, or any subjecting of goods to operations other than for the purpose of preserving them in good condition or for adding or affixing marks, labels, seals or any other documentation to ensure compliance with any specific requirements.
There are two ways that goods brought into Northern Ireland from Great Britain are not ‘at risk’. You should consider which of these two options is most suitable for your business. Goods will be not ‘at risk’ where:
- the applicable EU tariff is zero (including goods which originate in the UK where you are able to claim a preferential rate of duty under the UK-EU Trade and Cooperation Agreement).
- the goods are for sale to, or for final use by, end consumers located in the UK and are brought into Northern Ireland by a trader authorised under the UK Trader Scheme
The business must be authorised for the UK Trader Scheme to declare the goods brought into NI as not ‘at risk’.
Supporting evidence for each consignment moved into NI will need to be kept for 5 years. Examples of evidence to support not ‘at risk’ declaration include:
- Commercial receipts and invoices
- Delivery receipts
- VAT invoice
- Commercial contracts and purchase orders
In the absence of this authorisation confirming your goods are not at risk, the goods will be deemed at risk and relevant duties may apply.
Subject to certain conditions, it may be possible for you to claim a waiver for duty on goods that you bring to Northern Ireland from Great Britain. This is available if your goods are “at risk” and are subject to a positive tariff rate.
Claims under the Tariff Waiver Scheme must be made on your import declaration and you must submit a duty waiver form to HMRC following the submission of your customs declarations with further details of the claims you have made.
HMRC is investing a further £16 million in a grant programme to fund employee training and IT improvements for customs intermediaries, traders and hauliers that make customs declarations. Businesses that complete customs declarations now have until 31 January 2022, or earlier if funding is fully allocated, to apply for grant funding to help them increase their capacity to do so.
The UK EU Trade and Cooperation Agreement (TCA) eliminates customs duties on products originating in the UK or EU. The TCA has been written to encourage production of goods between the EU and the UK. It will not allow for the free movement of goods that are not of EU/UK origin between the EU and the UK (e.g. Chinese goods imported into the EU then exported to the UK). In determining whether preferential or reduced rates of customs duty are available on the import of products, the origin of the imported products is key.
There are 2 basic rules of origin:
1. Wholly obtained - e.g. an animal born and raised in a specific country, or a plant grown in a country would be wholly obtained in that country.
2. Substantial or sufficient transformation - 3 major criteria usually used in a trade agreement for determining this:
- A change in tariff classification (“tariff shift”)
- A percentage of value-added
- Having undergone a specific manufacturing process.
If you export to non-EU (third countries), you will need to continue to file an export declaration as is current practice.
The Northern Ireland Protocol is designed to prevent a hard border on the island of Ireland, therefore in the main the flow of goods between Northern Ireland, the Republic of Ireland and the rest of the EU should remain unaffected and customs declarations will not be required for goods moving directly between NI and the EU.
From a VAT perspective, the movements of goods between Northern Ireland and EU Member States will be treated as dispatches and acquisitions (as was previously the case). However Northern Ireland businesses must now use an “XI” prefix in front of their VAT registration number when trading under the NI protocol.
Yes. The UK Government has published guidance on importing animals, animal products and high-risk food and feed not of animal origin from 1 January 2021. If your products are of animal origin, additional documentation such as health certificates signed by vets are required for exporting these products across borders.
Where you are importing goods of animal origin into the UK, you must provide the correct certification with your import and enter the EU through a Border Control Post (BCP), previously known as border inspection post (BIP) or designated point of entry (DPE), where checks will be carried out to make sure that the import conditions have been met. In some cases, you may need an import licence or authorisation.
The Northern Ireland Protocol allows for 'unfettered access' for Northern Ireland businesses to the rest of the UK. However, Northern Ireland agri-food producers will be required to continue to align with EU [Sanitary and Phytosanitary] rules.
Agri-food goods entering Northern Ireland from Great Britain do so via a Border Inspection Post or Designated Point of Entry as required by EU law. They are subject to identity and documentary checks and physical examination by UK authorities as required by the relevant EU rules. There is however a three-month grace period until 31 March 2021 for products of animal origin and plant products entering NI.
The requirement for veterinary documentation and customs agents’ charges to move the goods compliantly will result in additional costs. However, the UK government has confirmed that where a business is moving live animals or products of animal origin from GB to NI, the business does not need to pay for the Export Health Certificates they need. Instead, the veterinarians carrying out these checks will invoice the government directly.
The Trader Support Service (TSS) has been designed to facilitate businesses in submitting their customs declarations (for goods moving directly between GB and NI), although many businesses do submit declarations themselves, this can be complex and time consuming for those business that do not have previous experience in this area.
Customs declarations for goods moving into and out of Northern Ireland can be lodged to HMRC via an online platform, without TSS support, however, this can also be complex and investing in the necessary software to lodge them yourself can be expensive.
Yet, if you expect to be submitting a large number of declarations, it may be more cost effective for you to undertake this yourself. HMRC offers grants and training to help you undertake the completion of customs declarations in-house. Before making your decision, compare in-house costs to using a customs agent and consider the following:
- Do you have the in-house expertise to do customs documentation?
- Do you have the volume of business?
- Is it more costs effective to do it in house or appoint an agent?
- Do you have time to prepare and train staff?
HMRC has published guidance on the steps, rules and documentation a business importing for the first time needs to consider. Information on who can use simplified procedures and how to apply for them.
As an NI business, there is no requirement for any import or export documentation to accompany your goods as these remain dispatches and acquisitions. For GB businesses, as GB will now be considered a third country to the EU (and vice versa), there now exists a hard border between GB and the EU. This means, regardless of the tariff position, border control procedures will be in place and therefore businesses now need to make customs declarations (C88), ensuring they have classified and valued their goods and evidenced whether they have UK/EU origin.
Each consignment will require an export declaration. Suppliers should be aware of their terms of trade (“Incoterms”) with their customers as these will determine who is responsible for filing import and export declarations.
Since January 1 2021, you need an EORI number to move goods between the UK and the EU. If you do not have one, you may have increased costs and delays. For example, if HMRC cannot clear your goods you may have to pay storage fees. For Northern Ireland businesses, an XI EORI number is needed to move goods between NI and non-EU countries (including GB), make a declaration in NI and get a customs decision in NI. In order to get an EORI that starts with XI, a business must already have an EORI that starts with GB. It is possible for a business to apply for a GB and XI EORI number at the same time.
If I already have a deferment account, can I use this for imports and exports after the EU Transition Period?
Businesses in Northern Ireland will be able to use an existing Duty Deferment account provided it is supported by a Customs Comprehensive Guarantee. However, if the value of your imports increase, you should revisit the value of your deferment account limit (and your guarantee) to ensure you can continue to import an increased level of imports and not breach your deferment account limit.
For the business to act as a declarant (importer of record) and clear goods in the EU, an EU establishment will be required, or an indirect representative that is resident in the importing country should be appointed to undertake customs formalities in the EU on your behalf. It is also understood that in order to operate a Duty Deferment account in the EU, an EU establishment will be required.
An establishment is usually determined on a case-by-case basis based on each trader's individual circumstances. However, indicators of an establishment include having human and technical resources available to carry out normal business activities or make some business decisions in the country in question.
Where you have an EU or global market now that the EU Transition Period has ended, it is important that you have sufficient systems in place so that the correct documentation can be produced. It is vital you understand your supply chain to determine who is responsible for filing what and when. For example, a declaration for imports and exports is completed on a C88 form and requires detailed information from various sources.
The Department for International Trade announced in August 2019 that the UK government intended to establish up to 10 Freeports across the UK. Freeports are generally secure customs zones traditionally located at ports that allows business to be undertaken inside a country’s land border, but where different custom’s rules apply.
However, the UK government is proposing a bespoke UK Freeport model which include multiple customs zones located within or away from a port as well as a tax site, all within a Freeport outer boundary where additional planning, regeneration and innovation measures would apply.
To date a bidding process has been undertaken in England which is currently under evaluation. Discussions are ongoing with the devolved administrations as to the establishment of Freeports in the Scotland, Wales and Northern Ireland.
Northern Ireland will remain part of the United Kingdom’s (UK) VAT system but will maintain alignment with European Union (EU) VAT rules on goods. This means that Northern Ireland will be bound in the same way as the rest of the UK on certain UK VAT changes.
However, the Northern Ireland Protocol also allows the UK Government to apply Northern Ireland VAT exemptions and reductions, including zero rating, corresponding to those applicable in Ireland.
There is no further information available at this time on any VAT rate changes in Northern Ireland.
Currently NI is aligning with UK VAT rates. There is no indication whether this will change in the future. Businesses should continue to use UK VAT rates.
How will goods supplied from the UK (excluding Northern Ireland) to an EU Member State be treated from a VAT perspective, post the Transition Period?
The supply of goods from the UK (excluding Northern Ireland) to other EU Member States (which involves the physical movement to an EU member state) will constitute an export for VAT purposes. This means a requirement to collect the relevant evidence to support VAT zero rating, where applicable.
Will HMRC still be responsible for the collection of VAT and customs and excise duties in Northern Ireland?
HMRC will remain responsible for the collection of VAT and other indirect taxes in Northern Ireland and the rest of the UK.
Northern Ireland business will continue to file both arrival and dispatch Intrastat declarations for the foreseeable future (in respect of movements of goods between NI and the EU). This sale of goods should also be reflected in an EC Sales List. However, EC Sales Lists reporting for the provision of services from NI to EU member states are no longer required.
Given Northern Ireland will be bound by EU VAT rules, NI businesses and those classified as trading under the NI protocol should be able to avail of these simplifications. Triangulation simplifications will no longer be available to GB businesses where they act as the “middleman” or where the goods originate or are destined for GB.
UK VAT compliance filing arrangements should remain the same in relation to current deadlines and how VAT returns are filed. However, taxpayers should be aware of the further digital changes for VAT for returns starting on or after 1 April 2021.
Post 01 January 2021 there remains uncertainty as to the mechanism by which Northern Ireland businesses may rely on EU VAT case law. However, given the Northern Ireland Protocol requires the UK to implement certain EU VAT law into the UK legislation, it is likely that any future European Court of Justice (ECJ) case law would need to be accepted by UK courts for the decision to be binding on Northern Ireland business. This point is not clear at the time of writing.
The supply of services will follow UK VAT rules only, in contrast to supplies of goods. With respect to services provided to non-UK business customers, these will generally be outside the scope of UK VAT, with the overseas customer responsible for any local taxes upon receipt. Where services are supplies to private overseas customers, the default position is that UK VAT should continue to be charged, unless the supply falls into one of the exceptions (of which there are many) - in certain cases an overseas VAT registration could be required depending upon the specifics. HMRC's guidance on this is in Notice 741A, which covers both the basic rules and the exceptions.
A movement of goods from Northern Ireland to an EU Member State will be treated as an EU dispatch from a VAT perspective i.e. there will be no change.
The VAT rules for these types of supplies will remain the same. These continue to be treated as acquisitions with acquisition VAT being due where appropriate. Intrastat arrivals declarations will have to be completed subject to normal thresholds.
These transactions should remain to be treated as a UK domestic sale. Depending upon the nature of the goods, UK VAT remains chargeable at the applicable rate.
Whilst this is technically an export from GB to the EU, the seller of these goods should continue to charge UK VAT at the appropriate rate. The customer should use the invoice provided as evidence for reclaiming this VAT charged. This will not apply to exceptions such as goods which are subject to the domestic reverse charge. In this instance, the customer will continue to account for UK VAT on these goods.
As per HMRC guidance, a business will not be required to account for VAT when it moves its goods from Northern Ireland to Great Britain unless these goods have been subject to a sale or supply.
Unlike the above scenario, the business will have to account for VAT on the movement of these goods. This should be included as output VAT on the VAT return. However, where the goods are being used for taxable sales, the VAT may also be reclaimed as input VAT on its UK VAT return subject to the normal rules.
These should be chargeable at the applicable rate of VAT in Northern Ireland. Currently these are UK VAT rates.
Where a business in Northern Ireland sells goods to a non-business consumer in an EU Member State, (i.e. a distance sale), UK VAT will be due up until the point where the Member State distance selling threshold is breached, at which point VAT is chargeable in that Member State at the Member State's applicable rate of VAT. Please note that these rules will be subject to change come 1 July 2021 with the introduction of the EU’s e-commerce package which introduces a One Stop Shop for distance sales.
The EU Commission has confirmed that taxable persons established in Northern Ireland or Member States should be able to use the OSS for declaring and paying VAT due on their intra-EU distance sales of goods.
Taxable persons established in Northern Ireland should be able to request a refund of VAT paid in Member States on goods only via the EU VAT refund scheme and vice versa. Any EU VAT incurred on services will need to be refunded by making a claim directly with the EU jurisdiction in question.
HMRC has confirmed that margins schemes involving goods, other than motor vehicles, will not generally apply for sales in NI where stock has been purchased in GB, with VAT accounting required under normal rules. However, these margin schemes should remain unchanged for sales of goods that are purchased in NI or the EU and sold in NI or the EU.
Where sellers are in GB, the margin scheme will remain available for stock purchased in NI or GB, albeit the position is a little unclear for goods purchased in the EU for sale in GB.
HMRC have introduced new rules on consignments so that imports from outside the UK valued below £135 must have the VAT collected at the point of sale. This change will require the overseas seller to register for UK VAT to account for UK output VAT at the point of sale.
HMRC has confirmed that where goods sold on board ferries between GB and NI, UK VAT will be due and accounted for on the seller’s UK VAT return. Where goods are sold on journeys that visit GB and NI as part of a voyage to third countries the sale will be treated as outside the scope of UK VAT and where goods are sold on journeys between NI and an EU member state they are taxed in the place of departure, as is the case currently.