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‘Rule of Origin’ Brexit rule starts to bite: UK customs duties jump 64 per cent in a year to record £4.5bn

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The main increase in customs costs comes from the “rule of origin” tariff, which applies to goods imported from the EU which were originally made, or contain components made, outside of the EU.

Customs duties paid by UK businesses have jumped 64 per cent to a record £4.5bn in the year to 31 January 2022, up from £2.9bn in the previous 12 months, according to new research shared with City PM this afternoon.

The rise comes as post-Brexit increases in customs duties begin to bite for UK businesses and consumers, accountancy firm UHY Hacker Young found.

The figures show that the last five months to 31 January 2022 are the five highest individual months on record for customs duties paid, with over £2.1bn paid in that period alone.

This is likely to be driven by businesses who chose to defer the submission of customs declarations because of the increased admin burden on the business.

Post-Brexit ‘Rules of Origin’ requirements mean anything sold in the UK by EU businesses must wholly or largely originate in the EU to be exempt from customs duties when it enters the UK.

Rules to become even stricter

The figures could jump higher as the ‘Rules of Origin’ requirements become even stricter.

From January 1st, the Government introduced a requirement that importers must show a declaration about the origin of the goods at the point of entry.

If a business cannot prove the origin, they may be liable to pay the full rate of customs duty and could face penalties.

“This shows how the post-Brexit increase in custom costs to UK consumers is really biting,” said Michelle Dale, Senior Manager at UHY Hacker Young.

Dale told City PM today that “the cost of tariffs and extra paperwork is causing serious difficulties for many businesses, who are already struggling to stay profitable in the face of mounting pandemic-induced costs.”

“Over the past year custom duties have been a hugely significant additional cost for many businesses.”

“For a lot of them, custom duties have taken a big bite out of their profitability. Businesses who import and export goods between the UK and EU might be questioning whether their business models are viable,” Dale concluded.