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What are the issues to consider around free ports?

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Andrew Galliers - Menzies Accountant

Andrew Galliers – Transport & Logistics Specialist

Sean Turner

Sean Turner – VAT Specialist

With the UK Government proposing to create ten free ports beyond Brexit to increase international trade – What impact could they have on UK hauliers and are they ready for the changes?

Customs-free zones

Turning British ports into ‘customs-free zones’, like those in some other parts of the world, would allow businesses to bring goods into the country, for processing or manufacture followed by re-export, without incurring tax and customs duty liabilities.

Planning for free ports

Getting yourself prepared for free ports is no easy business especially not for cash-strapped hauliers. Without any certainty on the matter, the best we can say is that if the free port proposals go ahead, they are likely to be well spread out geographically – potentially at ports such as Felixstowe, Teesport and London Gateway, as well as some airports in the London area and potentially elsewhere, such as Prestwick. 

Although no urgent need for hauliers to relocate to these areas, they should at least be aware of how their routing may be impacted if free ports are introduced and the impact this could have on operating costs. These ports could bring vast amounts of opportunity for some operators by acting as a new transport hub; allowing hauliers to optimise trip capacity and improve efficiency. For larger operators, the potential returns could be sizeable, but even smaller operators could expect to see reduced pressure on margins.

Careful cash management will be important

Ensuring they are ready to flex their operational footprint to take advantage of these new transport hubs will require careful cash management. For example, SME hauliers need to review operational data and ensure they have a handle on the cost per mile, the percentage of full loads and the percentage utilisation of the fleet, warehouse or both. This key information can then be utilised to calculate the value that the use of any free ports may bring. For some operators, redesigning processes and investing in innovation, that could lead to bespoke software-based solutions, could benefit from claiming R&D tax relief.

How will import and export processes be impacted

aeroplane yellow

Some changes to import and export processes are likely to be required if the free port proposals are implemented. For example, VAT and customs duties on goods coming into the port would effectively be suspended, but declarations would still be required to provide an audit trail of goods movements. This is likely to require new administrative procedures and it may make sense for operators to consider such changes now and ensure they have robust procedures in place. In terms of their readiness for Brexit, most operators are as prepared as they can be. Some have Authorised Economic Operator (AEO) status, as a certificate of competence, and HMRC has already taken steps to ensure importers within the supply chain are signed up to Transitional Simplified Procedures (TSP) and have an Economic Operator Registration and Identification (EORI) number too.

Prepare to capitalise

While SME hauliers will be reluctant to invest until there is greater certainty, the free port proposals should be considered closely. Understanding the cost impact that the changes could bring is critical and some carefully managed, strategic investment could ensure the business is ready to capitalise on the changes, if or when the time comes.

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Posted in Blog, Transport & logistics

Andrew Galliers - ACA

Senior Manager

Andrew Galliers is a Senior Manager specialising in business audit and compliance advisory services and international accounting and tax issues.