What if…The UK rejoined the EU Customs Union?

30 Jan 2025

If you are a fan of the Marvel Comics What If series, you will be familiar with the idea of speculating what could happen if certain events had a different outcome to reality. Given the recent headlines regarding the possibility of the United Kingdom (UK) rejoining the European Union (EU) Customs Union, we thought it would be fun to speculate what this would mean for business aviation by asking our Tax Directors, Adrian Parcell-Jones and Greta Kemper.

Has a country ever left the EU and then rejoined its customs union?

No. While a few countries have joined and then left, it would be unprecedented for a country to join and then leave the EU and then rejoin only the EU Customs Union.

How would the UK go about rejoining the EU Customs Union?

Every EU member state would need to agree to this. While this is highly unlikely, if it was to occur would likely entail negotiations on special jurisdictions such as Gibraltar and Northern Ireland. There would also be a large cost involved in reintegrating the UK to the EU Customs Union which would be hard for the UK government to justify given the huge expense of leaving in 2020.

Would this mean the UK was part of one customs territory with the EU again?

Yes. Any goods imported into one territory (either UK or EU) would get equivalence in the other territory following the reintegration.

So does this mean only one set of customs duties and taxes?

Not quite. Customs duties would apply equally on entry into the customs territory, however, taxes such as VAT would still be applicable on import into either the UK or the EU.

OK – so I still have to pay VAT twice?

Yes. The UK rejoining the EU Customs Union does not mean the UK is rejoining the EU Single Market. VAT is a duty of Customs at import, as well as a tax which is due and payable on internal transactions within the UK and the EU Single Market. Therefore, unless the UK rejoins the EU VAT system, VAT would still need to be paid twice – once for the UK and once for the EU, because joining the EU Customs Union is not the same as joining the VAT territory of the EU. Any discussion on VAT integration between the two territories would need much stronger political alignment and oversight by a pan-UK/EU institutions and courts to ensure a level playing field for trade between the UK and the EU and would start to look like the UK were rejoining the EU as a full member state.

So are there any benefits for business aviation if the UK were to rejoin the EU Customs Union?

They are limited. There are not many Customs tariffs which are applied to civil aircraft. There may be limited benefits to aircraft parts. Additionally, the benefits that business aviation was getting through temporary admission and utilizing customs warehouses in the UK would no longer apply.

Oh, so why does the UK want to do this?

It doesn’t! The proposal being discussed is actually a pan-European trade agreement which would look to remove Customs tariffs and rules on the origin of goods between the EU members states and 20 other countries including the UK, Turkey and the Middle East. The proposed agreement is only in the early stages of discussion.

Ahhhhh! So what are the benefits of a trade agreement with the EU?

A pan European trade agreement would remove tariffs and assist trade but probably would not have a huge impact on aviation; as noted above, there are not may tariffs on the import of civilian aircraft. A trade agreement would have the benefits of not impacting the benefits of temporary admission and customs warehousing which the UK have seen post Brexit.

Any other thoughts?

We think it is incredibly unlikely that the UK will rejoin the EU Customs Union at this time. It is more likely the current UK government will look for a trade agreement with the EU to facilitate trade and reduce checks on goods passing the borders.

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