VAT Director Rayner Essex
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Brexit reality 3: Rules of origin

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Jason Croke tackles some technical aspects that are continuing to confuse businesses who are importing goods from the EU, in this case import duty and the rules of origin.

10th Mar 2021
VAT Director Rayner Essex
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The “duty free” deal that the UK government announced on Christmas Eve comes with some caveats that can cause issues.

Rules of Origin

The topic is vast and cannot be sufficiently covered in one article, but I will attempt to give you a brief explanation and examples to better understand it.

Example 1

A company in Great Britain (GB) imports oranges from Florida (USA). If the GB entity then forwards those oranges to an EU member state, the origin of the oranges is still Florida, that is where they were grown. 

If the GB entity squeezes the oranges and turns them into orange juice or maybe uses the pith and skin in a hand-cream, and then ships the goods to an EU member state, the origin may change to GB because sufficient processing has taken place to change the original product into something else. 

It’s a lot more technical than that, the above is a simplified example to explain the logic of rules of origin.

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Replies (5)

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Caroline
By accountantccole
11th Mar 2021 10:03

Thank you - helpful summary

Thanks (2)
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By aka_bilk
11th Mar 2021 10:15

What is really killing small order trade between the UK and the EU are the handling fees made by the couriers. These can be far higher than the tariffs. For example the big name couriers are now charging on average a £4.50 border fee to the exporter. Then anything from £8 to £12 to the importer. They are charging both parties for the same parcel.

Thanks (1)
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By adjadj
11th Mar 2021 14:51

What would help is if some of the examples discussed whether the person who imports into the UK has to pay VAT on received goods and whether they must charge VAT when exporting. The answer may be No and No but this would provide clarity and help understanding of the issue of importing/exporting

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Replying to adjadj:
Jason Croke
By Jason Croke
12th Mar 2021 08:04

I did two articles covering the import/export VAT side of things earlier in February, this article on Rules of Origin is the next in the sequence and there are some other articles coming shortly covering Incoterms and One Stop Shop.

There is loads of excellent content here on AccountingWeb, by numerous (excellent) authors.

https://www.accountingweb.co.uk/tax/business-tax/brexit-reality-1-import...

https://www.accountingweb.co.uk/tax/business-tax/brexit-reality-2-consum...

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By richwinks
06th Apr 2021 09:57

Thanks Jason. One issue I am having is the inconsistencies between shipping agents. I have a situation that I am importing a product from France into the UK, there is no Duty just VAT. I am making a small change to the product and selling back to Poland, the origin of the product remains France. One shipping agent wants to charge Duty and VAT another says no Duty. I am of the opinion that there is no Duty. HMRC seem to have washed their hands and my poor customer is getting very frustrated. Please can you shed some light on this please?

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