The effects of the EU-UK Trade Agreement on cross-border trade

The EU-UK Trade Agreement explained

AVASK Marketing Brexit, Brexit Hub, English

On 24th December 2020, the UK and EU struck a historical trade deal: the EU-UK “Trade and Cooperation Agreement”.

The deal, a 2,000-page-long document, was reached only a week before the official exit of the United Kingdom from the European Union, and it establishes the grounds for future collaborations between the two parties.

It covers all aspects of fishing rights, movement of people and immigration, transport, and of course trade.

It is fair to say that businesses on both sides of the Channel are breathing a sigh of relief at the news, after UK PM Boris Johnson had communicated to prepare for a no-deal scenario, this being the most plausible of outcomes.

In this article, we explore how the agreement will affect trade and cross-border business operations in detail. We also provide a list of the steps online businesses can action now to ensure minimal disruption after 1st January 2021.

The EU-UK Agreement and cross-border trade

The UK formally left the EU on 31st January 2020 and entered into a transition period, which has kept the UK in the customs union and the single market. But this runs out on 31st December and as a result, the UK will no longer hold the rights and benefits of other EU Member States, such as free movement of goods and abolishment of customs borders and import duties.

To limit the disruption to both UK and EU citizens and businesses, the parties have discussed potential trade deals throughout 2020.

The trade talks were first extended on 13th December and finally ended on 24th December 2020, when an historic Free Trade Deal was agreed “in principle” by all negotiators.

Now, both the European and UK parliaments will need to rectify, sign and make the agreement law.

President of the European Commission, Ursula von der Leyen stated: “It was worth fighting for this deal as we now have a fair and balanced agreement with the UK […] Finally, we can leave Brexit behind us and look to the future” (source).

The reason why this Trade Deal has been defined as historical is because of its nature as a “zero tariff-zero quota deal”. Moreover, the Trade and Cooperation Agreement goes beyond traditional free trade agreements, providing a solid basis for future cooperation and friendship between the UK and the EU.

What the EU-UK Trade Agreement means for trade

Firstly, it means that the UK will hold a preferential position in relation to the EU when compared to other non-EU countries.

Secondly, and most importantly, it means that 0% customs duty rates and a number of simplifications in the EU-UK trade will be introduced.

Without a trade deal, the UK would have had to abide to World Trade Organization (WTO) trade rules when dealing with the EU – a potentially disastrous scenario for businesses and people in the UK. For example, under WTO, exports on meat and dairy products would have seen an application of tariffs above 40%, of 25% for canned fish and of 10% on exports of cars (source).

Entrepreneurs should note that the period running from 1st January to 28th February 2021 will be deemed as a “provisional” period to ensure the terms of the agreement can be applied by both negotiating parties.

What will change for your business

Does the Free Trade Deal mean that you will see no changes when trading with the UK or the EU?

No. Despite the agreement, 1st January 2021 will still represent the starting point for several big changes for UK and EU businesses wishing to import or export goods on the other side of the Channel.

The first fundamental thing to keep in mind is that on 1st January 2021 the UK and the EU will effectively become two separate markets. As a result, barriers to trade and cross-border mobility and exchanges will be put into place again after decades of inactivity thanks to the EU Single Market and its benefits.

This may cause delays and potential disruptions to your supply chain.


One of the first and biggest changes to come into place with the beginning of the new year will certainly be customs borders.

While customs procedures will be simplified under the Agreement, checks will apply to all goods on both sides of the Channel. The good news is, both the UK and the EU decided to cooperate on the recovery of customs duties.

Rules of origin

In order to classify their goods as zero tariff-zero quota imports, both UK and EU businesses must prove their products’ ‘rules of origin’. This means that the imported product must be derived from a nation taking part in the agreement.

This step is to combat circumvention from other third countries trying to import their goods into the EU via the UK.

Import VAT

While you may not need to pay tariffs and import duties for your imported goods, businesses will still be required to pay import VAT.

At customs, you will need to present your Commodity Code, which will be used to determine the VAT payable on goods in the UK. However, the UK will roll out a Postponed VAT Accounting (PVA) system that will allow UK VAT registered businesses to defer the payment of import VAT at customs.

How to prepare your business

As we have discussed, the Free Trade Agreement does not mean that you will not experience changes when trading with the UK or the EU.

AVASK has prepared a checklist to ensure your business is ready for the upcoming changes:

  • Prepare for customs declarations – from 1st January 2021, you will be required to make customs declarations when you import your goods from the EU into the UK or vice versa. While you can make customs declarations yourself, we recommend you rely on the help of your courier or freight forwarder. You can find out more about import/export and customs procedures on our Brexit Hub or by watching episode 3 of the AVASK Brexit Webinar Series, with Tom Meek, Piers Eveleigh and Kevin Shakespeare from the Institute of Trade.
  • Register for a GB EORI number (if you are an EU business) – to be able to clear your goods at UK customs, you must be in possession a GB EORI number. You will likely already possess an EU EORI number. However, this will not be enough to clear your goods at customs in the UK from 1st January 2021.
  • Register for an EU EORI number (if you are a UK business) – to be able to clear your goods at EU customs, you must be in possession of an EU EORI number. You will likely already possess a GB EORI number. However, this will not be enough to clear your goods at customs in the EU from 1st January 2021. AVASK offers an EORI Registration Service that can help you obtain an EU or GB EORI number – find more information here.
  • Set up a duty deferment account – you can decide whether to pay VAT and customs duty as soon as your goods enter the UK, or to set up a duty deferment account. In the UK, you will be able to set up Postponed VAT Accounting (PVA) to defer your UK Import VAT payment. Please note that to set up PVA you will need to be a UK VAT registered business. You can find out more about UK VAT after Brexit on our Brexit Hub or by watching episode 1 of the AVASK Brexit Webinar Series, with Tom Meek, Cambridge Lyford and Alessandra Prataviera.
  • Find out if you need a direct or indirect representative – AVASK can offer you both direct and indirect representation services. With us as your UK representatives, the UK port of arrival of your goods will contact AVASK directly should there be any issues.


The UK and the EU have reached an historic Free Trade Deal that grants businesses trading across the Channel great benefits, the “EU-UK Trade and Cooperation Agreement”.

The biggest and most important of benefits is the introduction of zero-rated duties and tariffs for goods entering the UK from the EU or vice versa when meeting the rules of origin.

Despite the Free Trade Deal agreed by both parties on 24th December 2021, the UK and the EU will become two separate markets. This means that great changes are ahead of every UK and EU business wishing to keep on trading on both sides of the Channel.

The agreement will be ratified and tested during a “provisional” period running from 1st January to 28th February 2021. However, to ensure minimal disruption to their supply chain, businesses should take action now by: contacting their courier or freight forwarder for customs declarations; registering for a GB EORI number (if EU-based) or an EU EORI number (if UK-based); setting up a duty deferment account in the UK if needed; and, lastly, finding out about whether they will need direct or indirect representation in the UK.

AVASK Accounting & Business Consultants is always available to provide you with the support needed to prepare your business to the post-Brexit trading era. For any enquiries, doubts or requests, please feel free to get in touch with our Tax Advisors at or by filling in the form on our contact page.

Please note: the EU-UK Trade and Cooperation Agreement will be reviewed by both parties during the implementation period. It is likely that parts of the agreement will be subject to change. The information included in this article refer to the first draft of the agreement released on 24th December 2020. AVASK Accounting & Business Consultants will update the article should anything change substantially.