The UK Government should be taking practical steps now to reap the benefits of an independent trade policy when we leave the EU customs union. These include reducing tariffs, reforming agriculture and fisheries policy and exploring regulatory improvements.

A new briefing from the IEA’s International Trade and Competition Unit and ACITA makes several recommendations focused particularly on customs matters controlled by HMRC.

Preparation for leaving the customs union is vital and investment and focus on these particular areas will bring considerable benefit to the Brexit process, as well as wider trade priorities, both for large and small businesses.

Short term recommendations:

Boost transparency – new entrants and smaller businesses can be deterred from international trade by perceived bureaucracy and uncertainty.

Improve communication channels with businesses new briefing from the IEA’s International Trade and Competition Unit and ACITA makes several recommendations focused particularly on customs matters controlled by HMRC.

Build resource within HMRC – given many businesses’ international trade experience is exclusively within the EU customs union, they will need extensive support that HMRC may not be best placed to provide in-house. HMRC must focus on providing IT support skills training for businesses and consider engaging external professional services.

Roll-out self-assessment – liberalising trade with global partners will lead to an increase in the number of customs declarations to HMRC systems. Self-assessment should be rolled out to empower traders to take control of their compliance. This will reduce the number of declarations and lower risk of instability and outages in the system.

Infrastructure investment at borders – activity at ports and airports will increase as more goods are subject to customs controls.

Investment in infrastructure at the border will be necessary to handle reintroduction and expansion of customs controls.

Extend postponed VAT accounting – the abolition of acquisition VAT for imports of goods from the EU means VAT will be due at the point of import, presenting material cash flow disadvantage for many importers.

Postponed accounting for VAT should be reintroduced to all imports to negate cash flow disadvantage and improve competitiveness of business importing from the rest of the world.

Long term actions: 

There are also many larger infrastructure projects and activities with a longer time frame that the government should be planning and preparing for:

•    Reincorporate Border Force goods functions into HMRC

•    Integrate agencies and systems into a Single Window System

•    Reform aspects of the Union Customs Code when part of UK law

•    Invest in skills and retention of customs officials

•    Utilise flexibility available in VAT when the UK is no longer an EU member

Commenting on the report, author Victoria Hewson, Senior Counsel of the Institute of Economic Affairs’ International Trade and Competition Unit, said:

“As the debate continues about customs union membership at a high level, it is important not to lose sight of the tools and processes that can help businesses on the ground.  Many of these are already available to the UK government and should be implemented both as Brexit preparation and, whatever happens with the EU, to show we are serious about global trade and competitiveness.”

Commenting on the report, Stephen Hudson, ACITA Committee member, said:

“The full and precise implications of the UK referendum result will depend on the period of negotiation ahead, involving both the UK and our EU partners and leaving business very little time to react once the result is known. 

“Benjamin Franklin once said “By failing to prepare, you are preparing to fail”. ACITA’s focus is thus to ensure that our membership is operationally prepared regardless of the outcome of these negotiations.”

Notes to editors: 

For media enquiries please contact Nerissa Chesterfield, Communications Officer: nchesterfield@iea.org.uk or 0207 799 8920 or 07791 390 268

To download the report, ‘Under Control: What HMRC can do to prepare and optimise customs processes’, click here.

The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems and seeks to provide analysis in order to improve the public understanding of economics.

The IEA is a registered educational charity and independent of all political parties.

Further IEA Reading: The IEA Brexit Prize: A Blueprint for Britain – Openness not Isolation ; Brexit Prize: Final shortlisted entries