End Use Relief Changes – Welcome News as deadline extended until April 2019

11 May 2018

Following significant lobbying by the Oil and Gas Industry, the planned changes to the End Use Relief (EUR), including the Shipwork End Use (SEU) relief regime, have been postpone until at least April 2019.

First announced by HMRC in Customs Information Paper (CIP) 33 published in January 2018, the proposed changes were due to take effect from 31 July 2018.  The impact of the changes, as well as the short timescale in which to implement new authorisations and procedures, raised significant concerns for the sector.  Estimates by Oil and Gas UK put the immediate cost at £145m this year with an ongoing annual cost of £120m.

The changes announced by HMRC were driven by an EU review undertaken by the Commission’s Special Procedures Expert Group.  Following this review, the EU’s guidance was amended in November 2017 to clarify that the assignment of the goods to the prescribed End Use must (physically) take place within the EU. 

Previously, oil and gas businesses had used EUR to import goods free of duty where they planned to remove those goods to offshore facilities on the UK Continental Shelf (UKCS).  However, as a result of the change, such a planned use could no longer qualify for EUR.  CIP 33 also highlighted that HMRC will not issue an authorisation for EUR where assignment of the goods outside the EU, including to the UKCS, was planned.  Furthermore, HMRC advised that businesses had until 31 July 2018 to either put the goods to a prescribed end use, export them from the EU or pay the duty due on the goods.  As the throughput period for end use goods for many businesses can be up to 2 years, the 6 month transitional period was inadequate to allow businesses to take necessary actions and avoid triggering a liability.

Consequently, for many businesses, these changes will lead to an increased administrative burden and the potential imposition of import VAT and customs duty.  The extension of the transitional period until 30 April 2019 is to be welcomed but will simply delay the problem for oil and gas businesses.  For some businesses, alternative customs duty reliefs that will secure the same result may be available; however, for others, the only option will be to enter the goods to free circulation, bearing the customs duty costs in the process.  Regardless, the cost of administering the changes will not be insignificant.

Businesses should now make use of the additional time provided by the extension to review their current arrangements to fully understand the impact of the upcoming changes.  Although this is a EU wide change, for UK businesses the position is worsened by the uncertainty around how the customs duty landscape will look following the withdrawal for the Customs Union with our former EU partners.

If you have any queries about the changes to EUR, the alternative options and solutions available, or if you would like more information, please contact Alistair Duncan (alistair.duncan@aab.uk).

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