The Customs and Value Added Tax (Managed Transition Procedure) (EU Exit) Regulations 2021

Statutory Instruments

2021 No. 1375

Exiting The European Union

Customs

Value Added Tax

The Customs and Value Added Tax (Managed Transition Procedure) (EU Exit) Regulations 2021

Made

7th December 2021

Laid before the House of Commons

8th December 2021

Coming into force

31st December 2021

The Treasury make these Regulations in exercise of the powers conferred by section 51(1) and (3)(a) of the Taxation (Cross-border Trade) Act 2018(1).

The Treasury consider it appropriate in consequence of, or otherwise in connection with, the withdrawal of the United Kingdom from the EU to make the following provision, including such provision as might be made by Act of Parliament.

PART 1 Preliminary

Citation and commencement

1.  These Regulations may be cited as the Customs and Value Added Tax (Managed Transition Procedure) (EU Exit) Regulations 2021 and come into force on 31st December 2021.

PART 2 Extension of period in which the Customs (Managed Transition Procedure) (EU Exit) Regulations 2019 apply

Amendment of the Customs (Managed Transition Procedure) (EU Exit) Regulations 2019

2.—(1) The Customs (Managed Transition Procedure) (EU Exit) Regulations 2019(2) are amended as follows.

(2) In regulation 1 (citation, commencement and effect), for “12” substitute “24” in each place it occurs.

PART 3 Accounting for import VAT by VAT registered persons making customs declarations by conduct

Interpretation

3.  In this Part—

“Commissioners” means HMRC Commissioners(3);

“eligible person” has the meaning given by regulation 3(2) of the Customs (Managed Transition Procedure) (EU Exit) Regulations 2019(4);

“import VAT” means value added tax chargeable by virtue of section 1(1)(c)(5) of VATA 1994;

“prescribed accounting period” has the meaning given by section 25(1)(6) of VATA 1994;

“registered for VAT” refers to registration under Schedule 1(7) or 3A(8) to VATA 1994;

“relevant importation” has the meaning given in regulation 6;

“VATA 1994” means the Value Added Tax Act 1994.

Application

4.  This Part applies in any case where—

(a) Part 2 of the Customs (Managed Transition Procedure) (EU Exit) Regulations 2019 applies,

(b) the eligible person is registered, or required to be registered, for VAT, and

(c) the eligible person, or an individual on behalf of the eligible person, declares the goods by conduct for the free-circulation procedure in accordance with regulation 4 of those Regulations.

Obligation to account for and pay import VAT in accordance with this Part

5.—(1) An eligible person (P) must account for and pay import VAT on goods which comprise a relevant importation in accordance with the provision made by this Part.

(2) The effect of section 16(2) of VATA 1994 (application of customs enactments)(9) is modified to the extent that this Part makes different provision for accounting for import VAT, including the timing of such accounting, on a relevant importation.

Relevant importation

6.  A “relevant importation” is an importation of goods into the United Kingdom where the goods are—

(a) chargeable with import VAT for which P is liable,

(b) used or to be used by P for the purposes of a business P carries on, and

(c) required to be declared for the free-circulation procedure(10) under Part 1 (import duty) of the Taxation (Cross-border Trade) Act 2018.

Obligation to account for import VAT on VAT return

7.  P must account for and pay the import VAT on goods which comprise a relevant importation on the return that P is required to make for the prescribed accounting period in which the liability for the import VAT is incurred.

Application with modifications of the Value Added Tax (Accounting Procedures for Import VAT for VAT Registered Persons and Amendment) (EU Exit) Regulations 2019

8.  The following provisions of the Value Added Tax (Accounting Procedures for Import VAT for VAT Registered Persons and Amendment) (EU Exit) Regulations 2019(11) apply for the purposes of this Part with, where applicable, the stated modification—

(a) regulation 8 (interest in cases of official error) applies as if the reference to the importation of relevant goods were a reference to a relevant importation;

(b) regulation 10(1)(a) and (2) (appeals).

Modification of the Value Added Tax Regulations 1995 where this Part applies

9.  Where this Part applies the following provisions of the Value Added Tax Regulations 1995(12) apply with the stated modifications—

(a) regulation 28 (estimation of output tax) is to be read as if—

(i) the reference to “output tax” includes import VAT chargeable on goods comprising a relevant importation; and

(ii) the words from “in the next prescribed accounting period” to the end were “in the prescribed accounting period in which the Commissioners make available to the person details of the amount of import duty due from the person on goods comprising a relevant importation (and “import duty” in this regulation means import duty charged under section 1 of the Taxation (Cross-border Trade) Act 2018).”;

(b) regulation 29(3) (claims for input tax) is to be read as if the words from “in the next prescribed accounting period” to the end were “in the prescribed accounting period in which the Commissioners make available to the person details of the amount of import duty due from the person in that prescribed accounting period on goods comprising a relevant importation (and “import duty” in this regulation means import duty charged under section 1 of the Taxation (Cross-border Trade) Act 2018).”;

(c) regulation 32(3)(baa) (the VAT account) and regulation 40(1)(ba) (VAT to be accounted for on returns and payment of VAT) are to be read as if after “2019,” were added “or Part 3 of the Customs and Value Added Tax (Managed Transition Procedure) (EU Exit) Regulations 2021,”.

Craig Whittaker

Rebecca Harris

Two of the Lords Commissioners for Her Majesty’s Treasury

7th December 2021

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations make appropriate transitory provision relating to customs and value added tax in consequence of, or otherwise in connection with, the withdrawal of the United Kingdom from the EU.

Part 1 provides for citation and commencement.

Part 2 amends the Customs (Managed Transition Procedure) (EU Exit) Regulations 2019 (S.I. 2019/487) (“Managed Transition Regulations”) to extend the period in which the Managed Transition Regulations apply (and thereby to extend the period during which the existing powers to make public notices under the Managed Transition Regulations may be exercised) for a further 12 months (subject to any provision in regulations providing for them to cease to have effect on an earlier date). The Managed Transition Regulations will now cease to have effect at the end of the period of 24 months beginning with IP completion day.

Part 3 sets out how an eligible person making a Customs declaration for the free-circulation procedure by conduct specified in a public notice under regulation 4 of the Managed Transition Regulations is to account for import VAT in respect of relevant importations. The terms “eligible person” and “relevant importation” are defined terms (see regulations 3 and 6).

Regulation 7 provides that a person to whom Part 3 of these Regulations applies is to account for import VAT on relevant importations on the return the person is required to make for the prescribed accounting period in which the liability for import VAT is incurred.

Regulation 8 provides that regulations 8 (interest in cases of official error) (modified as stated) and 10(1)(a) and (2) (appeals) of the Value Added Tax (Accounting Procedures for Import VAT for VAT Registered Persons and Amendment) (EU Exit) Regulations 2019 (S.I. 2019/60) apply where Part 3 of these Regulations applies.

Regulation 9 provides that regulations 28 (estimation of output tax), 29(3) (claims for input tax), 32(3)(baa) (the VAT account) and 40(1)(ba) (VAT to be accounted for on returns and payment of VAT) of the Value Added Tax Regulations 1995 (S.I. 1995/2518) apply with the stated modifications where Part 3 of these Regulations applies.

Any notices that are made under the Managed Transition Regulations will be published at: https://www.gov.uk/government/collections/customs-vat-and-excise-uk-transition-legislation-from-1-january-2021. A person unable to access the notices electronically may access them in hard copy by post free of charge on application to 0300 322 9434.

A Tax Information and Impact Note covering this instrument will be published on the website at https://www.gov.uk/government/collections/tax-information-and-impact-notes-tiins.

(1)

2018 c. 22. Section 51(4)(b) defines the “appropriate Minister” as meaning the Treasury.

(2)

S.I. 2019/487, modified by S.I. 2020/1605. S.I. 2019/487 was brought into force on IP completion day by S.I. 2020/1643 (C. 50).

(3)

“HMRC Commissioners” is defined in section 37(1) of the Taxation (Cross-border Trade) Act 2018 (c. 22) (“TCTA 2018”) to mean the Commissioners for Her Majesty’s Revenue and Customs.

(4)

Under regulation 3(2) of the Customs (Managed Transition Procedure) (EU Exit) Regulations 2019 a person is an “eligible person” if (a) the person is of a description specified in a public notice given by HMRC Commissioners and (b) is not subject to a notice given by an HMRC officer under regulation 3(3) in relation to the importation that the person ought not to be regarded as a fit and proper person. Any public notices made under the Customs (Managed Transition Procedure) (EU Exit) Regulations 2019 will be published at: https://www.gov.uk/government/collections/customs-vat-and-excise-uk-transition-legislation-from-1-january-2021. A person unable to access the notices electronically may access them in hard copy by post free of charge on application to 0300 322 9434.

(5)

1994 c. 23. Section 1(1)(c) of VATA 1994 was substituted by section 41(2)(b) of TCTA 2018.

(6)

Section 25(1) of VATA 1994 was amended by paragraph 25 of Schedule 8 to TCTA 2018.

(7)

Schedule 1 to VATA 1994 was amended by paragraph 13 of Schedule 3 to the Finance Act 1996 (c. 8); sections 31, 32 and 113 of, and paragraph 1 of Schedule 18 to the Finance Act 1997 (c. 16); section 136(6) of the Finance Act 2000 (c. 17); paragraphs 1 and 3 of Schedule 2 to the Finance Act 2003 (c. 14); section 100(8) of the Finance Act 2007 (c. 11); paragraphs 2 and 11 to 13 of Schedule 28 to, and paragraphs 1 and 8 of Schedule 29 to, the Finance Act 2012 (c. 14); S.I. 2017/290 and paragraphs 1 and 81 of Schedule 8 to TCTA 2018.

(8)

Schedule 3A to VATA 1994 was inserted by Schedule 36 to the Finance Act 2000 (c. 17); and amended by paragraphs 1 and 11 of Schedule 29 to the Finance Act 2012 (c. 14) and paragraphs 1 and 85 of Schedule 8 to TCTA 2018.

(9)

Section 16 of VATA 1994 was substituted by paragraph 13 of Schedule 8 to TCTA 2018 and previously modified by S.I. 2020/1495.

(10)

“The free-circulation procedure” is defined in section 3 of TCTA 2018.

(11)

S.I. 2019/60; amended by S.I. 2020/1495, S.I. 2020/1545 and S.I. 2021/715.

(12)

S.I. 1995/2518, relevantly amended and modified by S.I. 1997/1086; S.I. 2003/1114; S.I. 2007/1418; S.I. 2009/586; S.I. 2019/59; S.I. 2019/60; S.I. 2020/1495.