UK businesses that export to the European Union (EU) are being told to set up separate firms inside the bloc to avert extra charges, paperwork and taxes resulting from Brexit.
Britain’s Brexit deal with the bloc — agreed on Christmas Eve — secures tariff-free and quota-free trading between the pair.
Under the agreement, food and goods imported into the UK from third countries and then shipped to the EU will face charges. The deal also introduces new customs checks and paperwork at the border.
The trading agreement between the pair includes a one year waiver on declarations on “rules of origin” conditions, which state how much of an item needs to be locally made in order to avoid tariffs.
Under the terms, tariffs will be charged on goods that do not meet rules of origin requirements. But, the new Brexit system and sheer volumes of the paperwork is said to have caused confusion and delays at borders since 1 January.
UK businesses will need to submit 215 more customs forms a year after Brexit — which could cost £12bn ($16.4bn), according to government calculations published last July.
According to the Observer, UK small businesses are being encouraged advisers working for the Department for International Trade (DIT) to register new firms within the EU single market, from where they can distribute their goods more freely and avoid border problems and VAT issues.
A spokesperson for the DIT said: “This is not government policy, the Cabinet Office have issued clear guidance.” The spokesperson referred to the government guidance for businesses and encouraged all businesses to “follow” the guidance. “We are ensuring all officials are properly conveying this information.”
Responding to the reports, Rachel Reeves, shadow chancellor of the Duchy of Lancaster and shadow minister for the Cabinet Office said on Twitter (TWTR): “The government's own advisors telling British businesses - overwhelmed by costs and red tape - to relocate operations to the EU.”
“They've got to get a grip on this before jobs are lost and our economy suffers even more,” Reeves added.
Earlier in January, senior minister Michael Gove warned UK businesses to brace for “significant disruption” at ports. Gove said on Friday that disruption at Britain's border had not been "too profound" yet.
He especially warned on the impact at the French border. "It is the case that in the weeks ahead, we expect that there will be significant additional disruption — particularly on the Dover-Calais route," the cabinet minister said.
But, the UK and EU gave some reprieve to companies and exporters. Firms exporting goods between Britain and the European Union will be given a 12-month grace period on some supporting Brexit-related paperwork in efforts to ease into the new regime.
Companies will not have to produce paperwork from their suppliers proving that their goods are locally made and eligible for zero-tariff access to the EU until 2022. This eases the burden faced by car manufacturers and aerospace firms which import large numbers of parts from many countries.
Meanwhile, hauliers waiting for their paperwork to clear during Brexit custom checks face a £50 an hour fine. Truckers have been told that from 1 February, after the first two hours of waiting at the nine sites for the green light, they will be charged £50.
The move is to minimise disruption at the ports, as hauliers wait for their paperwork to clear at special “inland border facilities.”
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