The devil is in the detail – A response to the HMRC ‘no deal’ letter

The current political machinations surrounding attempts to reach an agreement with the EU for an orderly exit on 29th March are bringing into focus the very real possibility of a no deal exit, so much so that HMRC have recently written to many VAT registered traders to advise on actions to take to plan for that eventuality.

HMRC’s letter is very brief and suggests some practical actions that should be taken now to ensure businesses that trade with the EU are ready for a no deal exit. It is helpful, but massively underplays the potential ramifications of going out without a deal (as you might expect).

If we fail to reach an agreement before 29th March and we continue to plough ahead regardless, then all trading in goods with EU countries is going to represent imports or exports, so many traders are going to have to beef up their processes and systems very rapidly in order to cope with the significant extra regulation associated with importing and exporting. If the flow of goods in and out of the country is to be maintained at its existing level, then many organisations, including HMRC, are going to be on a very steep learning curve in the coming 3 months.

The pain associated with Customs procedures can be alleviated somewhat by obtaining so-called Authorised Economic Operator (AEO) status. This is an EU devised scheme which allows businesses to be vetted (by HMRC) to assess the quality of their import/export processes, their financial stability and their supply chain security. It is an internationally recognised standard, so it enables smoother movement of goods throughout the world, but it will become particularly relevant if the UK leaves the EU and begins trading under WTO rules.

HMRC allude to this in their letter under the heading of applying for an Economic Operator Registration and Identification (EORI) number. An EORI number is needed as an absolute minimum to import and export, so all businesses involved in the international movement of goods should apply for an EORI number if they don’t already have one. This is a straightforward process.

Once an EORI number has been allocated, it is then possible to apply for AEO status, but all businesses considering this should take a deep breath before starting this process. The form filling alone is quite daunting, but the real issue is the level of self-assessment required to conclude whether the business can meet the very stringent process and quality requirements. Dafferns can provide help and guidance in this respect if desired.

Is it worth the investment of time, I’m sure business leaders will be asking? Well that depends on your attitude to insurance – if a no deal exit does transpire then AEO status will be the best possible insurance product available to gain a competitive advantage. So you might take some comfort in knowing there are real practical steps that can be taken to keep your goods flowing.