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Customs and VAT rules for free zones

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HMRC has published new regulations which set out the customs, excise and VAT rules that will apply for free zones located within freeports in Great Britain. Free zones are secure customs zones located within a freeport, where business can be carried out inside the UK’s land border, but where different customs, VAT and excise rules apply.

The Free Zones (Customs, Excise and Value Added Tax) Regulations, SI 2021/1156, establish the customs rules for the operation of free zone procedures and also make further amendments to the Customs (Contravention of a Relevant Rule) Regulations, SI 2003/3113, to impose penalties for breaches of rules in relation to free zones. Section 7.3 of the explanatory memorandum to the regulations provides a useful summary of the new measures.

The regulations also add a new Group 22 to VATA 1994 Sch 8, to provide for the zero-rating of supplies of goods and services between free zone businesses within a free zone. The invoicing rules in the VAT Regulations, SI 1995/2518 reg 14 are also amended to require the words ‘free zone’ to be used on relevant invoices.

The regulations also set out rules for customs controls of excise goods in free zones.

The regulations come into force on 8 November 2021.

Issue: 1550
Categories: News