Who is likely to be affected

Businesses that either:

• import goods to Great Britain or Northern Ireland
• move certain goods between Great Britain and Northern Ireland

General description of the measure

The measure makes various provisions concerning the customs duty charges that will apply in Great Britain and Northern Ireland under the Taxation (Post-transition Period) Act 2020 (TPTP Act).

The measure sets out how these duty charges will be calculated, as well as relief and repayment arrangements in relation to these charges. The measure also:

• provides for how other United Kingdom (UK) customs legislation will apply for the purposes of these charges
• makes other amendments and consequential changes to UK customs legislation

Policy objective

These provisions will allow customs processes and legislation, including customs duty charges provided for in the Taxation (Post-transition Period) Act 2020, to operate fairly and effectively from the end of the transition period.

Background to the measure

This measure includes provisions made under powers in the Finance Act 2003 and the Taxation (Cross-border Trade) Act 2018 (TCTA), in order to support the customs duty charging provisions that were inserted into the Taxation (Cross-border Trade) Act 2018 by the Taxation (Post-transition Period) Act 2020. The charging provisions do not go beyond what was agreed in, or are a consequence of, the Northern Ireland Protocol (the Protocol).

The Protocol sets out the special arrangements for Northern Ireland that were agreed by the UK and the European Union (EU) as part of the terms for the UK to leave the EU. The Protocol is contained in the Withdrawal Agreement, which was published 19 October 2019. The Protocol protects the Good Friday Agreement and avoids a customs border between Northern Ireland and the Republic of Ireland.

Detailed proposal

Operative date

The measure is intended to have effect from the end of the transition period, that is, 11pm on 31 December 2020.

Current law

During the transition period, EU customs legislation has continued to apply in the UK. From the end of this transition period, the Taxation (Cross-border Trade) Act 2018 will apply in relation to UK customs duty. However, under the Protocol, the Government has also agreed that specified EU customs legislation can continue to have effect in respect of Northern Ireland.

Much of the legislation introduced by this measure is made under the Taxation (Cross-border Trade) Act 2018, and relates to customs duty, special customs procedures and the rules that apply in relation to the UK Crown Dependencies.

The Customs and Excise Management Act 1979 and regulations made under this Act, also set out customs requirements and HMRC powers in relation to the importation and exportation of goods. Finance Act 2003 and regulations made under this Act, make provision for the application of penalties for breaches of customs rules.

Proposed revisions

The measure sets out rules in relation to the customs duty charges that will apply in Northern Ireland and Great Britain under the Taxation (Post-transition Period) Act 2020.

This instrument supports the new charging provisions at sections 30A and 30B of the Taxation (Cross-border Trade) Act 2018. These relate to imports into Northern Ireland. The instrument:

• specifies when customs duty charges will apply and exceptions
• ensures that for chargeable goods, HMRC can apply the UK tariff, or the EU tariff where the goods are ‘at risk’ of entering the EU

The instrument also supports the new charging provisions at sections 40A and 40B of the Taxation (Cross-border Trade) Act 2018. These relate to the removal of goods to Northern Ireland from Great Britain. The instrument:

• specifies when customs duty will apply and exceptions
• ensures that for chargeable goods HMRC can apply the UK tariff, or the EU tariff where the goods are ‘at risk’ of entering the EU.

Domestic goods moving to Northern Ireland from Great Britain will only be subject to customs duty where they are ‘at risk’. There are provisions to reduce a charge, in cases where the goods were previously imported into the UK and customs duty had been paid on import.

The instrument also supports the new charging provision at section 30C of the Taxation (Cross-border Trade) Act 2018. This relates to goods moving to Great Britain from Northern Ireland. It is intended that there will be no customs requirements in Great Britain for such goods unless the goods are either:

• subject to the charge on removal to Great Britain from Northern Ireland
• subject to excise duty, for which a customs declaration will be required

There are provisions to reduce a charge, where goods were previously imported into the UK and customs duty had been paid on import.

It also specifies when goods leaving Northern Ireland retain their domestic status for the purposes of the Taxation (Cross-border Trade) Act 2018.

The measure includes various other changes to Taxation (Cross-border Trade) Act 2018 and other UK customs legislation, such as to prevent overlap between domestic customs legislation and the EU customs legislation that would apply in respect of Northern Ireland.

For example, the measure includes changes to Taxation (Cross-border Trade) Act 2018 rules concerning the availability of special customs procedures, so that these Taxation (Cross-border Trade) Act 2018 procedures can usually only be used for goods imported to the UK by entry to Great Britain, while goods remain in Great Britain.

In addition, Taxation (Cross-border Trade) Act 2018 rules that apply for certain transit procedures (where goods are moved across borders under internationally agreed customs rules) are modified so that the necessary customs formalities may be required where goods arrive in Great Britain (including from Northern Ireland).

Elsewhere, the measure includes provisions concerning various customs matters, such as:

• customs co-operation between the customs authorities of different states
• the requirement on businesses to retain customs accounts and records and potential penalties for breaches of customs rules

The purpose is to ensure UK customs legislation can operate alongside the EU customs legislation that will also apply in respect of Northern Ireland.

Summary of impacts

Exchequer impact (£million)

Once the UK transitions to its new relationship with the EU, costings, where required, will be subject to scrutiny by the Office for Budget Responsibility and included in their forecasts at a future fiscal event.

Economic impact

This measure is not expected to have any significant macroeconomic impacts.

Impact on individuals, households and families

This legislation supports the customs duty charging provisions that were inserted into the Taxation (Cross-border Trade) Act 2018 by the Taxation (Post-Transition Period) Act 2020.

The measures do not introduce any requirement for individuals beyond what has already been agreed in or is a necessary consequence of the Protocol. There is not expected to be any impact on family formation, stability or breakdown.

Equalities impacts

It is not anticipated that there will be any impacts on groups with protected characteristics.

Impact on business including civil society organisations

This measure is not expected to have any additional impact on businesses, including civil society organisations, as it is in line with the implementation of the Protocol, which is already part of UK law, and as such the impacts have already been considered.

Operational impact (£million) (HMRC or other)

There will be no operational impact as a result of this measure as it contains provisions to support the customs duty charging provisions that were inserted into the Taxation (Cross-border Trade) Act 2018 by the Taxation (Post-transition Period) Act 2020. It does not introduce any new requirement beyond what has already been agreed in the Protocol or is a necessary consequence of what has been agreed.

Other impacts

Other impacts have been considered and none has been identified.

Monitoring and evaluation

The measure will be kept under review through communication and continuing stakeholder engagement with trade bodies and other representative businesses.

Further advice

If you have any questions about this change, contact Anne Berriman, email: anne.berriman@hmrc.gov.uk.

Declaration

The Right Honourable Jesse Norman MP, Financial Secretary to the Treasury has read this tax information and impact note and is satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impacts of the