Following more than three years of debate and negotiation, the UK will leave the EU on Friday 31 January, but that will not be the end of the story, or of the uncertainty.
The UK will no longer be an EU member state from 1 February 2020 and will no longer have members of the European Parliament, an EU commissioner or representation at the Council of Ministers. However, under the terms of the Withdrawal Agreement, the UK will enter a transitional period during which it will be treated for most practical purposes as if it was still an EU member.
This period will last until 31 December 2020 and can be extended by mutual agreement.
During the transitional period, cross border trade in goods and services will operate in the same way as at present – there will be no customs border or customs duties between the UK and the EU, and for VAT purposes transactions will continue to be reported after the event on VAT returns EC sales lists and Intrastat returns in the same way as they are at present.
At the end of the transitional period, likely to be on 31 December 2020, the UK will become a third country. The implications of this will not be known until the trading negotiations between the UK and the EU are complete, but some aspects are already clear:
Until the trade negotiations are complete, we don’t know what the basis of the UK’s future trade with the EU will be.
If a full free trade agreement is completed, customs declarations will still be required for all goods movements between the UK and the EU, but there will be no customs duties on many of these transactions. However, it is likely that this duty-free treatment will be dependent on the origin of the goods.
For example, goods which have been imported from a third country which has no free trade agreement with the EU are unlikely to qualify for duty-free treatment when they are imported into the EU from the UK.
If the transitional period ends without a comprehensive free trade agreement, then there will be customs duties on some goods moving between the UK and the EU.
For goods exported to the EU, duty will be payable on the specific rate for the goods as set out in the EU’s external tariff. For goods imported into the UK, the duty rates will depend on what tariff is adopted by the UK. A temporary UK tariff was published as part of the no deal preparations in 2019, but it is not yet clear whether this will still apply if there is no free trade agreement at the end of 2020.
The terms of the UK’s trade with other countries will also change as specific trade agreements are made to replace the existing EU agreements which will no longer apply.