UK set to leave EU; no change to duty free rules during transition

UK/EU. The UK is set to exit the European Union tonight (11pm UK time, 31 January), although there will be no immediate return for duty free sales between the UK and EU.

Once the UK leaves, it will enter a transition period and begin negotiations over its future relationship with the EU. During this period, which will run until 31 December, there will be no changes to trading rules, and the UK will stay in the single market and the customs union.

There is scope for the transition period to run until 2023, but the UK government has said it will not allow it to be extended beyond December. Importantly, under the terms of the EU-UK Withdrawal Agreement, a decision to extend the transition period must be agreed by both sides before 1 July 2020.

If the UK leaves without a deal next December, it becomes a third country destination, meaning that EU single market rules no longer apply and duty free sales would return for travellers in both directions.

Industry lobbyists hope an agreement that incorporates future duty free arrangements can be agreed as part of a wider reciprocal trade deal. And they will continue to press for harmonised rules between the UK and EU on duty and tax free sales in the negotiation period ahead. Until now, for example, the UK has said that it would apply different rules around VAT on airside sales compared to the EU.

The UK last year also signalled that in the event of any return to a duty free regime, the rules would apply to “UK ports, airports and international train stations”. This has prompted the ETRC to lobby EU authorities to allow duty free sales at EU international train stations, to mirror rules in the UK.

If that were to happen, it could open the prospect of duty free at stations for train travellers moving between the EU and other non-EU countries, such as Russia.

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