Tax Strategy Group | TSG 18/08 | 1 BREXIT – TAXATION AND CUSTOMS IMPACTS Tax Strategy Group – TSG 18/08 10 July 2018
Tax Strategy Group | TSG 18/08
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BREXIT – TAXATION AND CUSTOMS
IMPACTS Tax Strategy Group – TSG 18/08 10 July 2018
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Introduction
On 23 June 2016 the United Kingdom voted to leave the European Union by a simple
majority of 51.9%.
This paper follows a ‘Brexit Taxation Issues Paper’ published for the Tax Strategy Group in
July 2017, and shall further examine the implications of the United Kingdom’s departure
from the European Union on tax and customs administration in Ireland. This work is an
input into the whole-of-Government contingency planning which is led by the Tánaiste and
the Department for Foreign Affairs and Trade.
The paper is divided into the following parts:
1. Overview
2. Budget 2018
3. Post Brexit Taxation Impacts
4. Post Brexit Customs Impacts
5. Conclusion
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1. Overview
1.1 On 29 March 2017, the UK Prime Minister, Theresa May, formally notified the
European Council of the UK’s intention to leave the EU. This marked the formal
commencement of the Article 50 process set out in the Treaty on European Union – the
withdrawal of a Member State from the Union with the negotiations formally underway
since then.
1.2 The current draft of the Withdrawal Agreement between the EU and the UK
provides for a transition period up to end 2020 during which the whole of the EU acquis
shall apply to the UK during the transition.
1.3 In effect, this means that, while the UK may no longer participate in the decision-
making processes of the EU, the status quo may be preserved as regards the UK’s
participation in the Customs Union and Single Market.
1.4 Beyond transition, the precise future arrangements for customs and taxation shall
depend on the outcome of future relationship negotiations between the EU and United
Kingdom
1.5 The expectation is that the negotiations on the Withdrawal Agreement would run
up to October 2018 in order to allow sufficient time for the Withdrawal Agreement to be
ratified by the UK, as well as by the European Parliament and the Council (Article 50),
before 29 March 2019 when the UK will formally leave the EU.
1.6 Under the Article 50 process, the objective is to reach political agreement between
the EU and the UK on a framework for the future EU-UK relationship, which would be
elaborated on by way of a political declaration accompanying the Withdrawal Agreement.
The detail of any future agreement can only be finalised and concluded once the UK is no
longer a Member State of the EU.
1.7 The Guidelines adopted by the March 2018 European Council reaffirm the Union’s
determination to have as close as possible a partnership with the UK after its withdrawal
from the EU. They note that the EU’s approach has been calibrated according to the UK’s
position, which limits the depth of such a future partnership. However, they also make it
clear that the EU is willing to revisit its position should the UK’s approach evolve.
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1.8 However, on the basis of the principle that nothing is agreed until everything is
agreed, the agreement reached on aspects of the Withdrawal Agreement, including
transition, is conditional on the UK fulfilling its commitments in other areas, including the
Protocol on Ireland and Northern Ireland.
1.9 The Commission services have published 76 preparedness notices for affected
stakeholders, setting out the consequences of the withdrawal of the UK from the EU
without a formal, ratified agreement between the UK and the EU.
1.10 The European Council in June 2018 called on Member States, Union institutions
and all stakeholders to ‘step up their work on preparedness at all levels and for all
outcomes’.
1.11 Acknowledging the above and that the precise future arrangement for customs and
taxation is therefore dependent on the outcome of the negotiation of the future
relationship, this paper seeks to outline some of the considerations that may be relevant
in respect of Indirect and Direct taxation (Section 3) and Customs (Section 4).
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2. Budget 2018
2.1 The Department of Finance began preparing for Brexit prior to the referendum in
2016, with work intensifying following the result and the invocation of Article 50 in 2017.
The decision of the United Kingdom to leave the European Union gives rise to
unprecedented challenges for Ireland across all economic sectors. Budget 2017 included a
number of measures to support those sectors most adversely affected. Building on Budget
2017, the measures announced in Budget 2018 demonstrate the Government’s continued
commitment to preparing the economy for the significant challenges posed by Brexit.
2.2 In Budget 2018, the Government has continued its policy focus of preparing the
economy and enhancing the resilience of the public finances to deal with the challenges
posed by Brexit. Specifically, it is currently projected that Ireland may achieve its medium-
term budgetary objective of a balanced budget in 2019. Complementing this, Budget 2018
further established the ‘Rainy Day Fund’, which provides a further counter-cyclical buffer,
and represents an important measure to strengthen the economy’s shock absorption
capacity. Legislation to establish the rainy day fund is currently being prepared and,
pending its approval, may begin capitalisation in 2019.
2.3 Budget 2018 also announced further dedicated Brexit responsive measures including:
A new €300 million Loan Guarantee Scheme for Brexit-impacted business and a
complementary €25 million Agriculture Brexit Loan Scheme – targeted at
enhancing the competitiveness of the businesses most exposed to Brexit;
A two fold increase of additional Brexit-related staff in state agencies;
The introduction of a Key Employment Engagement Programme (KEEP) – a new
incentive to attract key employees;
The Government has also committed to increasing public capital investment to c.4 per cent of GNI* and then maintaining investment at this proportion out to 2027, as set out in the recently published National Development Plan.
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3. Post Brexit Taxation Impacts
This section sets out some of the considerations that may be relevant in respect of indirect
and direct taxation. However, this paper makes no assumptions about the EU-UK future
relationship.
3.1 Indirect Taxation
High level impacts on indirect taxation
ISSUE IMPACTS
Fiscal Implications Price differentials and trade diversion
Lower price levels in the UK as a result of trade, exchange
rate or tax policy measures may cause consumers to
source less expensive product outside of the State. This
may have the effect of consumers exceeding personal
allowances for goods imported, therefore increasing the
risk of smuggling and illicit trade, which may in turn impact
on the Exchequer and consequently impose an increased
requirement for Revenue resources.
Possible return of Duty Free shopping at Ports/Airports
This would significantly impact on indirect tax revenues.
Policing of indicative limits for passengers would be very
difficult for Revenue to manage and may cause delays in
airports and ports. The return of duty free sales would
have resource impacts for Revenue as well as impacting on
wider social policies.
VAT Retail Export Scheme
VAT revenues may be lost as a result of the significant
volume of traffic between the UK and Ireland. This scheme
would also place a large administrative and resource
burden on Revenue.
Fraud
The management of two separate systems would give rise
to heightened potential for fraud through acquisition and
carousel fraud and the use of different online platforms.
Administrative and
cost implications
for business
Post Brexit, additional costs incurred on imports from the
UK may include customs duty (if applicable) as well as
VAT/Excise which would be due for payment at the time
of import.
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With trade in goods being treated as ‘third country’
imports and exports, and the supply of services falling
outside the EU VAT frameworks, the procedure for indirect
tax returns and the point of collection would change. This
would result in a permanent increased administrative
burden and cost for business.
Traders may use a customs agent for deferred payment of
VAT and Excise and for assistance with customs clearance
procedure. Such services come at a cost to business. In
2016, over 1.3 million customs declarations were
submitted to Revenue by 140 agents on behalf of
numerous Irish traders, whereas only 75 individual
businesses submitted declarations on their own behalf.
This suggests that a significant portion of third country
trade is facilitated by agents and this is also likely to be a
feature of trade with the United Kingdom post-Brexit.
Loss of
administrative
cooperation
between Ireland
and the UK
A loss of effective structures for coordinating policy and
operational approaches to tackling fraud as well as for
sharing intelligence and coordinating investigations may
be detrimental to combatting the risk of fraud post Brexit.
Ireland would be unable to conclude an agreement on
administrative cooperation and mutual assistance directly
with the UK as a third country. This must be negotiated by
the EU. It is important that satisfactory administrative
cooperation and mutual assistance arrangements are
provided for in the future relationship between the EU and
the United Kingdom.
Resource
implications for
Revenue
Brexit may have a number of implications for Revenue’s
administration of indirect taxes, including in relation to IT
systems, compliance and customer communications.
3.2 VAT
3.2.1 The rules governing the European Value Added Tax System for goods and services
are contained within the VAT Directive (Council 2006/112/EC). Following the departure of
the United Kingdom, the collection of indirect tax revenues on United Kingdom trade
would change from operating within current EU legislative frameworks to those that are
in place for ‘third countries’. A change to tax administration has the potential to have a
material impact on indirect tax revenues collected as a result of differing economic activity
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or increased opportunities for fraud as a reaction to alternative administrative systems
and/or tax rates.
The volume of trade and the number of Irish traders involved in transactions with the
United Kingdom is highly significant. The profile of traders and their imports of goods and
services from the United Kingdom indicates a significant number of low value transactions
undertaken by a large number of businesses. The number exporting is much lower and the
values are higher.
In 2015, over 90,000 VAT registered Irish traders acquired goods and services from the UK.
60% of these traders had imports from the United Kingdom totalling €10,000 or less during
that year. In the same year, over 10,000 VAT registered traders in Ireland provided goods
and services to the UK. 50% of these traders exported to the United Kingdom amounting
to less than €130,000 in that year.
EU VAT rules apply on the basis of business to business (B2B) or business-to-consumer
(B2C) supplies of goods and services. Special rules apply to supplies between Member
States, which would no longer apply to supplies to and from the UK post Brexit. The
anticipated changes in each area and the associated impact is outlined below.
3.2.2 B2B supplies to and from UK
Under EU rules businesses in Ireland and the United Kingdom may acquire and supply
goods and services cross border VAT free, this is known as ‘intra community supplies’. Such
movements are subject to a number of conditions, one being that the customer must be
registered for VAT in another Member State.
Post-Brexit, B2B supplies from the United Kingdom into Ireland would be considered ‘third
country’ imports, and VAT would therefore be chargeable at the point of import. This
would create significant administrative and cash-flow burdens for Irish business and may
ultimately impact on their competitiveness.
B2B supplies from Ireland to the United Kingdom would be considered exports. Exports to
third countries are zero-rated; however a Single Administrative Document (SAD Customs
Declaration) shall be provided to Revenue and shall contain details of the export. Evidence
may be required that the goods have left the EU, which may also create a new
administrative burden for business.
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3.2.3 B2C supplies to and from UK
Post-Brexit, B2C supplies of goods to the United Kingdom would be treated as exports and
Irish VAT would not be chargeable. B2C supplies of goods from the United Kingdom to
Ireland would be liable to VAT on import where the value exceeds the low value
consignment relief of €22 and this would have to be collected from the private importer
via the delivery company, who would also have to complete the customs formalities on
entry of the goods into Ireland. A Commission proposal was adopted in December which
may lead to the abolition of the low value threshold for imports. This would have obvious
implications for low value trade between Ireland and the United Kingdom.
There may be a loss of VAT receipts for the Exchequer on B2C sales from Ireland to the
United Kingdom as the zero rate of VAT may apply to all goods exported. Currently only
those goods exported by Irish businesses exceeding the United Kingdom current annual
threshold of approximately €90,000 are not liable to Irish VAT. Considering that the United
Kingdom’s threshold is relatively high, it is likely that many Irish businesses have not
exceeded this threshold and are charging Irish VAT. The loss of Irish VAT on these sales is
unlikely to be significant, but further research is required on this traffic.
3.2.4 Supplies of services to and from UK
In respect of the supply of services, the general rule is that B2B intra-community supplies
of services are chargeable to VAT in the business customer’s Member State. Post-Brexit,
supplies of services to United Kingdom business customers by Irish traders would not be
liable to VAT and supplies of services to Irish business customers by UK based traders
would continue to be subject to Irish VAT. Accordingly, VAT revenues should not be
impacted. B2C supplies of services, other than B2C supplies of broadcasting,
telecommunications and electronic services, are generally chargeable to VAT in the
supplier’s Member State, while B2C supplies of services to third countries are generally
not liable to VAT. This may result in some loss of VAT revenues but Revenue do not
consider that they would be of significance.
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3.2.5 Summary of VAT issues and impacts
ISSUE IMPACTS
Guarantees and
Deferred Payment
Traders importing goods from the UK, who do not hold a prior
arrangement with Revenue would have to pay all applicable
duties at the point of importation.
IT systems
UK Mini One Stop
Shop
United Kingdom would no longer have access to EU27 wide IT
systems or data thus requiring Irish business to register for VAT in
the United Kingdom, giving rise to additional administrative
burdens and costs.
Retail Export
Scheme
The Retail Export Scheme allows visitors from outside the EU
benefit from VAT relief on goods purchased in Ireland and
subsequently taken outside of the EU upon departure. Post Brexit,
under existing rules, visitors from the United Kingdom would be
able to avail of this scheme. The likely volume of activity could
result in considerable administrative costs and would be open to
abuse with potentially serious implications for VAT revenues.
Simplifications Agreed EU simplifications such as triangulation, call off stocks, and
consignment stocks, which assist compliance in more complex
supply chains would no longer apply to interaction with the UK.
EU Fiscal Rules Post Brexit, the United Kingdom may have more flexibility in
relation to their tax legislation and may be in a position to
introduce further incentives to attract business and investment to
the United Kingdom than is possible at present as an EU Member
State.
Double Taxation The interaction of EU and UK VAT systems post-Brexit may give
rise to some minor incidences of double taxation, where for
example goods that have borne VAT in one jurisdiction are
exported and are taxed on importation into the other jurisdiction.
VAT Fraud In a post Brexit environment, the Exchequer may be exposed to
new or increased risks in respect of carousel fraud or the risk of
non-established traders using platforms for e-commerce VAT
fraud.
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VAT on Used Car
Registrations
All cars imported from the UK would be liable to VAT at the
standard rate. VRT would be unaffected by Brexit apart from
whatever impact it might have on the price of imported used cars
from the UK. However, the importation process post Brexit may
eliminate the risk of abuse of the margin scheme that exists at
present and the potential for other VAT fraud in this segment of
the motor trade.
3.3 Excise
3.3.1 The rules governing excisable product is contained in the General Excise Directive
(Council Directive 2008/118/EEC).
Excisable goods move between Member States either with the associated excise duties
suspended for the duration of the movement (duty suspended goods) or with excise duty
paid (duty paid goods). For economic reasons, such as cash flow, the majority of intra EU
B2B move under duty suspended, as the duty does not have to be paid until the goods are
released for consumption.
At present, the movement of such products between Member States is controlled using
the Excise Movement and Control System (EMCS), a facility shared by all EU Member
States, which allows the movements to be tracked by relevant tax authorities. Post Brexit,
the United Kingdom would leave EMCS, requiring a change to the control of the movement
of excisable products through the United Kingdom 1.
Post Brexit, EU formal legislative and administrative mechanisms would no longer be
applicable to the United Kingdom. Without access to existing common and simplified
systems, alternative arrangements would be required to help identify and tackle fraud. A
loss of effective structures for coordinating policy and operational approaches as well as
for sharing intelligence and managing investigations would be detrimental to combatting
the risk of fraud. The benefits of such close cooperation are clearly illustrated by the
success of the recent joint effort between Revenue and HMRC in targeting fuel laundering.
1 According to 2015 figures, approximately 86% (48,000 movements) of all duty suspended movements of excisable products into Ireland came via the UK.
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Ireland would be unable to conclude an agreement on administrative cooperation and
mutual assistance directly with the UK as a ‘third country’, as this may only be negotiated
by the EU. A satisfactory administrative cooperation and mutual assistance arrangements
in the future relationship between the EU and the UK would be beneficial in this regard.
3.3.2 Personal Consumption Limits
The free movement of goods is a fundamental freedom of the Single Market. Consumers
are free to bring goods into the State without having to pay Irish VAT and Excise, provided
the goods are duty (VAT and Excise) paid in the Member State where the person acquired
them, and that the person acquiring the goods is personally transporting them for their
own use and not for a commercial purpose. There are no upper limits to the amount of
goods that can be brought into the State but indicative limits for excisable products are
specified in legislation and are used as a guide when determining if the goods are being
brought in for commercial purposes. These indicative limits are outlined in the table below.
When the United Kingdom leaves the EU, the free movement of these products would no
longer apply, as they would be entering the EU from ‘third country’. This would represent
a significant change for consumers and it would be necessary to raise awareness and
consider how it may be controlled and enforced in order to protect indirect tax revenues.
3.3.3 Duty Free Allowances
General Allowances
As a result of the United Kingdom’s status as a ‘third country’ consumers may be permitted
to bring goods from the United Kingdom to Ireland free of duty, provided their combined
value does not exceed €430 in the case of an individual aged 15 years or over or €215 in
the case of an individual aged less than 15 years old. Customs duty and VAT may be
charged on the full value of the goods where these limits are exceeded.
Excisable allowances
In addition, there are limits for excisable goods which, post Brexit, would be applicable to
goods arriving from the United Kingdom, see table below. Excise is charged on the excess
of these limits, once declared.
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Indicative Personal Consumption Limits within the EU and Duty Free Allowances for
Persons Entering Ireland from a Third Country2
Excisable
Products
Product Indicative Personal
consumption limits
within EU
Duty Free 3rd
country
limits
Tobacco
Products
Cigarettes 800 200
Cigarillos 400 100
Cigars 200 50
Loose tobacco 1kg 250g
Alcohol
Products
Spirits 10 litres 1 Litre
Intermediate products
(e.g. Port, sherry) and
Sparkling wine
20 litres 2 Litres
Wine 90 litres 4 Litres
Beer 110 litres 16 Litres
Considering Ireland applies significantly high rates of excise duty there is an obvious
likelihood that Irish consumers may avail of any new opportunities to buy duty free goods
when returning from visits to the United Kingdom and visitors from the United Kingdom
may act in a similar manner. It is worth noting that under Article 14 of Directive
2008/118/EC duty free shops may only be situated at a port or airport. Nevertheless
should duty free be available to travellers arriving from the United Kingdom it would
impact indirect tax revenues very significantly.
Traveller compliance with personal limits ideally ought to be controlled by duty free outlets
curtailing sales to the set limits, however, as this is currently not the case, customs checks
at points of entry may be applied if there is a suspicion that excessive amounts of these
goods are being imported or that personal limits on the overall value of goods that may be
imported without duty are being exceeded. This would evidently have consequential
resource implications for Revenue.
Any increases in duty free shopping would not only have fiscal consequences; the
increased availability of duty free tobacco and alcohol to Irish consumers would weaken
the effectiveness of fiscal policy as a tool in the area of Health and Welfare.
2 See EU Directive 2007/74/EC. Apportionment of allowances for all Tobacco products and for Spirits and Intermediate products are allowed on a fractional basis (e.g. 100 cigarettes and 50 cigarillos or ½ litre of spirits and 1 litre of Port).
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3.4 Direct Taxation
3.4.1 Direct taxation is largely a national competence and Direct tax issues are primarily
managed through the existing Double Taxation Agreement (DTA) between the UK and
Ireland. The existing DTA shall remain in place post Brexit. Following the UK departure,
they shall no longer be bound by the EU Tax Directives and other instruments. Such EU
Treaties afford Ireland significant protection in terms of discriminatory tax treatment.
Considering the UK would no longer be subject to such Treaties, Ireland can however rely
on the Double Taxation Agreement in terms of challenging discriminatory tax treatment
by UK.
Primary impacts
Legislative inconsistencies
Tax Competition between Ireland and UK
Stamp Duty - Central Securities Depositary
Legislative Inconsistencies
The primary issue would relate to the UK ‘falling out’ of collective legislative references or
definitions relating to EU or EEA Member States. This may result in national legislation
needing to be amended considering the significant use of such terms currently included in
Irish tax legislation3. It is noted that this issue arises across all Direct tax heads and
associated legislation4.
Tax Competition between Ireland and UK
Other issues relate to tax competitiveness where the UK would no longer be directly
subject to EU Codes of Conduct on business tax criteria which are designed to assess
harmful tax competition. However, the UK would still be a member of the OECD and
subject to the OECD Harmful Tax Practice criteria which overlap to a large extent with the
EU Code criteria. In addition, one of the objectives of the EU’s new external strategy is to
apply the Code of Conduct criteria to third countries when assessing whether or not they
should be on EU blacklist of non-cooperative third countries.
3 E.g. Taxes Consolidation Act 1997, Stamp Duties Consolidation Act 1999, and the Capital Acquisitions Tax Consolidation Act 2003. 4 E.g. Income tax, Corporation tax, Stamp duty, Group loss relief, Capital Gains Tax, Companies Gains Tax Group relief, and Capital Acquisitions Tax.
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The UK may no longer be bound by EU State aid rules and therefore may have a greater
flexibility in the design of tax incentives to attract certain types of Foreign Direct
Investment. As above, the State aid rules overlap to a limited extent with the OECD
Harmful Tax Practice criteria, but it is possible that Brexit presents a clear and marketable
competitive advantage for the UK in not being subject to State Aid rules.
3.4.2 Stamp Duty
Central Securities Depositories (CSDs) are specialist institutions which settle securities such
as equities or debt instruments. CSDs are authorised under the framework set out in the
EU Central Securities Depositories Regulation (CSDR). The CSDR also sets out a third
country regime based on equivalence assessments by the European Commission.
Settlement is the final part of the trading process and integral to any trade. Ireland is the
only Member State of the EU that does not currently have its own CSD. We currently use
Euroclear CSD London to settle securities traded on the Irish Stock Exchange.
For this reason, Brexit presents a risk in the context of the Stamp Duty on Shares. The
Department is considering options and mitigation measures in this regard.
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4. Post Brexit Customs Impacts
4.1 Customs policy and procedure is a sole competence of the European Union.
Following Brexit, the UK would be considered a ‘third country’ for customs purposes. The
legislative basis for the EU’s interaction with ‘third countries’ in a customs context is set
out in the Union Customs Code (UCC). The UCC and associated Delegating and
Implementing Acts provide the specific detail on what is required for goods being imported
and exported from and to third countries. It also outlines procedures for goods transiting
across ‘third countries’ from one EU Member State to another or to the rest of the world.
4.2 Customs controls on UK traffic
Customs controls involve administrative and risk-based physical checks. It would impose
requirements for documentation, including customs declarations upon entry and exit to
and from the European Union territory/ Rest of World and in addition necessitate the
requirement for safety and security documentation for all goods, in particular agri-food
products (the less processed the good the higher the safety risk).
Revenue estimate that the volume of declarations would increase from 2 million to 20
million per annum. The majority would be accounted for by small items (online purchases),
couriered by express carriers such as DHL. Each package would require a customs
declaration to be submitted to Revenue, technically known as a Single Administrative
Document (SAD). Revenue estimate that safety and security declarations could increase
from current figures of 59,000 to 2.8 million per annum as a result of the UK no longer
being compelled by EU safety and security acquis.
As a result of increased administrative requirements and customs controls, significant
delays on borders5 could be expected.
5 The Financial Times (Oct 2017) reported that an average of two minutes additional customs processing would lead to a 17 mile traffic queue at Dover. Significant additional infrastructure would be required in order to reduce congestion, and new technology would be necessary at the port to speed up the processing of customs declarations.
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4.3 Customs Transit Procedures (movements of goods from Ireland to the Single
Market via United Kingdom land bridge)
Brexit creates a unique difficulty for Ireland as a result of its geographical location, as
Ireland routinely utilises the United Kingdom as a ‘land bridge’ to access the Single Market.
Travel time to France from Ireland is almost doubled when excluding the UK as a route of
travel, which is not a viable option for time sensitive goods. The UK’s status as a ‘third
country’ therefore requires transport operators wishing to travel through the UK as a route
to mainland Europe to operate under a customs procedure called ‘transit’.
The UCC sets out the rules governing the movement of goods across the Single Market via
third countries. There are three types of transit procedure:
Union Transit - movement of goods within the Customs Union (Membership EU
MS’s)
Common Transit (Common Transit Convention CTC) - Allows for the movement of
goods between the Union, the Common Transit Countries (i.e. Iceland, Norway,
Switzerland. Liechtenstein, Turkey, former Yugoslav Republic of Macedonia, Serbia)
and between the Common Transit Countries themselves.
TIR (Transport Internationaux Routiers) - Allows for the movement of goods
internationally over one or more frontiers and where some proportion of the journey
between start and end of the TIR is by road.
The movement of goods, post Brexit would require management under the rules of the
UCC Custom Transit procedures. Transit would require the submission of multiple
declarations, financial guarantees and the imposition of physical and administrative
customs controls on goods. Such declarations may be made through the New
Computerised Transit System (NCTS). Currently there are some 36,000 transit movements
(165,000 consignments) managed by Revenue on an annual basis. Following Brexit, this
may be expected to increase to 4 million (20 million consignments), which would require
both customs and safety/security declarations.
Issues arising from Ireland’s unique geographic situation, including transit of goods (to and
from Ireland via the United Kingdom) is recognised in the joint UK-EU Progress Report,
December 2017.
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On 24 May 2018 the UK has applied to accede to membership of the Common Transit
Convention, this may assist the customs transit issues but not resolve same.
4.4 Revenue Resources
Customs currently serve as custodians of the Island’s frontiers, protecting the State at the
first point of entry of goods. In this capacity, Revenue are the competent authority for
identifying goods entering the EU that require non-fiscal controls including agricultural
goods, medicinal products, dual use items and prohibited and restricted goods. The
volume of this work would significantly increase as a result of Brexit.
As a result of the level of trade with the United Kingdom, the volume of air freight and
container traffic subject to customs controls may also considerably increase, which would
create significant resource issues for Revenue in terms of infrastructure and staffing.
4.5 Impact on business
Customs formalities on trade with ‘third countries’ are currently managed through
‘Authorised Economic Operators’ (AEO). Such operators are Revenue approved and have
access to Revenue IT systems. In return for their authorisation, the operators have in place
a customs guarantee to pay duty and VAT on a monthly basis rather than at the point of
import. Currently Ireland has 1446 AEOs, who account for 89% of third country imports.
Revenue have identified 38,000 traders who have regular dealings with the UK and a
further 100,000 who have less frequent trade. It is the larger group, with infrequent trade,
who are at risk to significant changes in processes as they are less likely to have AEO status.
The customs administrative burden may be most noticeable to small operators and single
shipments (of low value goods), where the services of customs agents must be used to
process through customs procedures, and discharge any duty owed. Revenue have
indicated that they do not intend to extend the use of their customs IT systems to all
traders, restricting that access only to authorised traders. This may necessitate smaller
traders to use an AEO as a customs agent, which may have a significant cost burden on
business.
6 Figure - May 2018
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4.6 Loss of administrative cooperation between IE-UK
The United Kingdom’s departure would in theory discontinue customs cooperation and a
loss of mutual assistance between the EU and UK, which is key to trade facilitation. The UK
would be outside the normal EU information exchange and mutual assistance
programmes.
4.7 Legal Uncertainty
The departure of the United Kingdom from EU legislative frameworks may cause legal
uncertainty and regulatory gaps which may be further hampered with the absence of legal
oversight from ECJ or clear dispute resolution mechanisms, especially for goods in the
midst of a customs procedure on the date of departure.
5. Conclusion
While there still remains a lack of clarity on the UK post-exit relationship with the EU, the
central scenario assumes that a transition period applies until end-2020 once the UK
formally leaves the European Union next March. This paper outlines issues that can be
foreseen post 2020 in terms of East-West trade, a ‘cliff-edge’ exit, involving a sudden exit
without a trading agreement in place, also cannot be excluded.