After months of talks, on 24 December 2020, the EU and UK were finally able to agree a new working trade agreement known as the EU-UK Trade and Cooperation Agreement (TCA). The new Trade and Cooperation Agreement came into effect on 1 January 2021 and will be applied on a provisional basis until 28 February 2021 as it is still to be ratified by the EU Council and Parliament.
The EU-UK TCA concluded between the EU and the UK sets out preferential arrangements in areas such as trade in goods and services, digital trade, intellectual property, aviation and road transport, energy, fisheries, social security coordination, law enforcement and judicial cooperation in criminal matters, thematic cooperation and participation in Union programmes.
The good news for many businesses that trade goods cross border between the EU and UK is that the free trade agreement provides for zero tariffs and zero quotas on all goods that comply with the appropriate rules of origin. Therefore, to obtain this preferential rate of duty, the goods traded cross border must either originate from the EU or UK. It will be important for businesses to understand these rules to ensure they are applying the correct rates of duty on goods imported.
Whilst there is now a trade agreement in place, there will still be changes in the way goods move cross border as these become imports and exports, undergoing customs procedures and requiring customs declarations. Furthermore, with Northern Ireland remaining in the EU single market and customs union, traders in Great Britain will also now have to consider new rules when selling goods to Northern Irish businesses.
The TCA also provides for mutual assistance on tax, which may have an impact on the requirement for UK companies to appoint a fiscal representative in those countries where it is required. It may take some time for any changes to be implemented by Member States, so it is recommended that UK businesses continue to meet these requirements as failure to do so can result in penalties for noncompliance.
For further information on how this may affect your business, please contact one of our VAT experts.
