Red tape bill for UK-EU trade under no-deal Brexit set to hit £15bn a year

Businesses would be hit with an annual GBP15bn bill for filling in customs forms for trade between the UK and the EU in the event of a no-deal Brexit, according to a British government paper published on Monday. Companies in the UK and EU would face “a significant new and ongoing administrative burden” if Britain were to crash out of the bloc, the assessment by HM Revenue & Customs warned. Prime minister Boris Johnson has insisted the country will leave the EU at the end of October with or without a deal, even though parliament has passed a law designed to prevent a hard Brexit.

The estimate of the extra administrative costs to business in the event of no-deal contrasts with Mr Johnson’s claim to the Conservative conference last week that the UK could save GBP1bn a month by leaving the EU on 31 October. In its no-deal impact assessment, the British tax authority detailed the cost to business to complete all the paperwork for the 215m consignments of goods crossing between the UK and the EU, assuming trade remained at 2017 levels.

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Monday, 7 October, 2019

HMRC’s figures are likely to be on the low side as they did not include the additional costs of complying with new VAT procedures for services companies, which dominate the UK economy, or for new VAT rules that would apply to parcels following a no-deal Brexit. They also exclude the one-off costs businesses would incur in preparing to fill in customs declarations.

It is estimated that large companies importing and exporting in high volumes would face a cost of GBP28 for filling in the forms for each load imported and that this would take an employee 1hr 45mins on average. If the work was outsourced, HMRC estimates the cost would rise to GBP56 for each consignment, based on the average charges of freight forwarders. This is the first time that HMRC has published such a detailed analysis of the costs to businesses in the UK and EU.

It said: “The final costs of completing customs declarations will vary significantly from business to business depending on how often they trade.” HMRC said the government would provide some help to businesses in the event of a no deal but did not specify the levels of financial support and estimated the annual “static total ongoing administrative burden on UK-EU trade is GBP15bn”.

Once you’ve cut tariffs to a very low level, even on a temporary basis, it would be hard to put them back again

Richard Asquith, an indirect tax specialist at the consultancy Avalara, said: “The main challenge will be lack of familiarity with the paperwork and customs deposits for the 245,000 businesses HMRC estimates will be affected. It creates a major drag on trade, and will inevitably strangle some cross-border trade”.

Separately, Liz Truss, UK trade secretary, will on Tuesday set out the tariff regime that would apply in the event of a no-deal Brexit — with almost 90 per cent of goods entering the UK expected to escape import taxes. The new regime represents a victory for the Treasury, which wanted to keep tariffs low in the event of a no-deal exit to avoid fuelling inflation in a highly volatile economic situation. Ms Truss had argued that the “temporary” tariffs — which are due to last less than 12 months — should be higher on the grounds that it would be harder for the UK to negotiate trade deals with third countries if had already removed its tariff barriers.

“Once you’ve cut tariffs to a very low level, even on a temporary basis, it would be hard to put them back again,” said one trade department official. Canada is among the countries holding back from negotiating a new trade deal with the UK, partly because it is already anticipating being able to export to Britain with low or zero tariffs in a no-deal scenario. A draft no-deal tariff schedule, published in March, applied import duties to 13 per cent of goods, including some meat and dairy products, vehicles, ceramics and fertilisers.

They were intended to support farmers and manufacturers.

The final schedule is expected to amend the previous list to include deep cuts to proposed duties on heavy trucks after protests from the UK haulage industry; the original schedule would have added about GBP15,000 to the cost of a typical HGV.

The government is also expected to increase the tariffs on bioethanol after the domestic industry warned that low tariffs on imports could threaten its future.

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