Scotland Brexit

Brexit: VAT & Customs Duty impact on Scottish Exporters

RSM, a leading provider of audit, tax and consulting services, delves into the impact VAT and Customs Duty changes could have on Scottish exporters post-Brexit...

With Brexit less than 14 months away, those Scottish businesses exporting goods to the EU will need to consider how the changes will impact them. Just under 50 per cent of all Scottish exports go to the EU, so forward planning will be key. However, the uncertainty surrounding Brexit does make planning for the future difficult. Early awareness of any significant changes can allow exporters to consider whether current systems and review processes will cope with the proposed changes.

The proposed Taxation (cross-border trade) Bill is still going through the UK Parliament and subject to change, but Scottish exporters should still be considering the potential impact of this on them and their EU customers. With the potential end to the Customs Union as we know it and with it, the free movement of goods within the EU, allied to the UK’s withdrawal from the Single Market, there are a number of issues that must be considered.


More red tape for exporters

Whereas there is no change in the VAT or customs duty treatment for the export of goods from Scotland to the EU, the proposals in the Taxation (cross-border trade) Bill mean there will be stricter border controls and changes to the free movements of goods within the EU which we have been so used since we joined the EU. The current administrative and compliance procedures that currently apply to exports from Scotland to outside the EU will likely apply to exports to the EU. This will see an increase in regulative and clearance procedures on goods passing through ports and airports on their way to the EU from Scotland. This could mean the transportation of goods will take longer and there will be an increased administrative burden and therefore increased costs for exporters. Some of these procedures may be mitigated if progress can be made on the so called frictionless Border issue.


Import ‘tax’ for EU customers

Come April 2019, and under the current Taxation (Cross-border trade) Bill, EU customers of Scottish products will find a number of changes to the way they currently buy goods from Scotland which will likely:

  • increase the cost as the customs duty may be applied that did not exist previously
  • become a cash flow issue as it is likely that import VAT is payable upfront by the EU customer but it should be recoverable subject to the EU customer’s VAT profile
  • increase in the administration and compliance burden and thus costs for the EU customer, similar to the Scottish exporter


The knock-on effect could be that Scottish exporters lower their prices to appeal to EU customers that have been hit by increased costs when importing goods from Scotland. However, this could allow EU competitors selling similar goods to undercut Scottish suppliers in a race to the bottom.

Even with the negotiations on Brexit still ongoing and the potential for change, Scottish exporters should be considering the potential impact of Brexit on their business. Businesses should conduct an audit of their potential VAT and Customs Duty burdens of Brexit to help understand their potential tax and compliance obligations, systems requirements and costs, and to start to plan for the future.