HMRC publish details of “at risk” EU transition guidance

Dec 21, 2020

Last week HMRC published the first version of its “at risk” guidance which establishes  if you need to pay tariffs on the goods you bring to NI because they are at risk of onward movement to the EU. The guidance also sets out details of the 31 December 2020 application deadline for the UK Trader Scheme (see more on this later - not to be confused with the Trader Support Service) for moving goods not at risk  and an important de-minimis test for businesses with turnover less than £500,000 who bring goods into NI for commercial processing.

We have had initial discussions with HMRC about this guidance and HMRC are keen to stress that the guidance is live and subject to potential change. We therefore recommend you bookmark the guidance page and check back regularly for updates. The NI Tax Committee is seeking further engagement with HMRC on the definition of at risk in particular and the short timescale for applying to the UK Trader Scheme.

When duty may arise

From 1 January 2021, businesses will need to make declarations and may need to pay any tariffs due when bringing goods into NI from GB or from countries outside of the EU. Whether you have to pay duty, and how much that duty is depend on where the goods are coming from and if they are ‘at risk’ of onward movement to the EU.

If goods are not ‘at risk’ then the business will either pay:

  • zero duty if moving goods into Northern Ireland from Great Britain; or
  • UK duty if moving goods from a country outside the EU.

If a business intends to bring goods into NI which are not at risk of moving to the EU, then they must apply for an authorisation for the UK Trader Scheme – more detail on this below. However, this scheme is not available where goods enter NI from a country outside of the EU and the UK, and the differential between the UK and the EU tariff is 3 per cent or more.

“Not at risk” definition

The key therefore is to decide if goods are at risk, or not. Goods are not at risk where either:-

  • the applicable UK tariff is equal to or higher than the applicable EU tariff - for movements into NI from GB, this covers goods where the EU tariff is zero; or
  • goods are brought into NI for sale to, or final use by, end consumers located in NI or, for internal UK trade elsewhere in the UK.

Goods entering NI for commercial processing

The Northern Ireland Protocol treats goods entering NI for processing differently. The guidance also contains specific rules which cover scenarios where goods are brought into NI for commercial processing.

If a business brings goods into Northern Ireland for processing and turnover is below £500,000 in its most recent financial year, the business can apply through the UK Trader Scheme to be able to declare goods as not ‘at risk’ in line with the treatment of other goods.

You can also apply to the UK Trader Scheme for authorisation to be able to declare goods for processing as not at risk if the goods you intend to bring into Northern Ireland are for certain purposes. These include goods for processing where the purpose is:

  • food for sale to end consumers in the UK;
  • construction, direct health and care provision, and not for profit activities carried out by importers in Northern Ireland; and
  • processing of animal feed for final use at premises located in Northern Ireland by the importer.

More detail on the UK Trader Scheme

Goods moved for sale to, or final use by, end consumers will be considered not at risk when moved by businesses authorised under the UK Trader Scheme. This therefore means that authorisation under the UK Trade Scheme will be a critical element for businesses.

In order to declare goods movements as being not ‘at risk’ from 1 January 2021, the business must have applied for UK Trader Scheme authorisation by 31 December 2020. In recognition of the tight timescale available to businesses to apply, if a business applies before the end of February 2021, subject to the necessary conditions being met it can be granted a provisional authorisation while HMRC processes your application. During this time the business can declare goods as not ‘at risk’.

Applications received after the end of February 2021 will be processed as normal. The guidance also sets out that the application process can typically take up to a month, therefore a business must ensure it applies one month before it intends to declare goods as not ‘at risk’.

From a practical perspective, with many businesses closing in the next few days for the Christmas break, we are seeking a pragmatic solution from HMRC which recognises that the guidance has been published so late and the timescale for applying for the UK Trader Service is extremely challenging.

Applications for authorisation are via an on screen form which can be saved onto a computer and once complete should be emailed to with the supporting documentation, quoting the EORI number of the business in the subject of the email.

This should be accompanied by proof of permanent business establishment or document of establishment (HMRC will provide more details on how this is defined in future guidance). A business may also provide evidence of its record keeping to supplement the information provided in application, but this is not mandatory.

We understand also from our initial discussions with HMRC that businesses who have already been granted trusted trader status such as Authorised Economic Operator status should find the application process faster as HMRC will already have available many of the details required for the application. We are also working with HMRC to provide businesses with an upfront full list of the information required to complete an application.

The guidance also sets out that business with a known history of serious non-compliance or criminal offences relating to its economic activity, will not be eligible.