Tag Archives: customs-duty

VAT: Postponed Accounting

By   9 February 2021
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VAT Basics

A quick look at Postponed Accounting (PA) and what it means for a business after Brexit

Pre-Brexit (if one remembers such halcyon days) acquisitions from other Member States crossed the UK border without any formalities as there was free movement of goods within all of the EU.

Now that GB is a third country, it is unable to take advantage of the benefits of a single market, so acquisitions become imports and are required to be declared when imported. However, gov.uk has announced he return of PA in an attempt to simplify matters.

PA

PA is accounting for import VAT on a VAT return means a business declares and recovers import VAT on the same return, rather than having to pay it upfront and recover it later. This means neutral cash flow; which is to be welcomed.

The normal rules about what VAT can be reclaimed as input tax will apply.

PA also has the advantage that imported goods are not delayed at the entry port while VAT paperwork and payment is completed. Of course, as experience has demonstrated; there may be other reasons for delays to imports and exports.

Who can use PA?

From 1 January 2021, if a business is registered for VAT in the UK, it will be able to account for import VAT on its return for goods it imports into:

  • GB (England, Scotland and Wales) from anywhere outside the UK
  • Northern Ireland from outside the UK and EU

There will be no changes to the treatment of VAT for the movement of goods between Northern Ireland and the EU.

A business does not need approval to account for import VAT on its returns.

How does PA work practically?

VAT is payable on imports of over £135 arriving into the GB from any country in the world, which now includes the EU. Practically, PA is similar to the current Reverse Charge. Output and input VAT is accounted for on the same VAT return.

When completing a customs declaration a business may choose how to account for VAT on its return.

If the Customs Handling of Import and Export Freight (CHIEF) system is used:

On the declaration, the following needs to be entered:

  • the EORI number starting with ‘GB’ which includes the VAT registration number into box 8, or, if applicable, the VAT registration number in box 44h
  • ‘G’ as the method of payment in Box 47e

If the Customs Declaration Service is used:

The VAT registration is entered number at header level in data element 3/40.

Returns

  • Box 1 – Include the VAT due in this period on imports accounted for via PA.
  • Box 4 – Include the VAT reclaimed in this period on imports accounted via PA.
  • Box 7 – Include the total value of all imports of goods included on your online monthly statement, excluding any VAT.

Using someone to import goods on your behalf

If a business uses a third party to import goods on its behalf (eg; a freight forwarder, customs agent, or fast parcel operator) it will need to inform them how it wants to account for VAT on those imports, so that they can complete the customs declaration correctly.

Alternatives

The use of PA is optional. The alternative is to pay VAT on goods when they enter the UK. This means the use of the “usual” C79 certificates sent by HMRC on which input tax may be reclaimed (rather than any other documentation, eg; invoices).

Northern Ireland

Goods moved to NI from the EU are not impots (NI remains part of the EU, so the old rules on acquisitions still apply and no import VAT is due).

Customs Duty

Alongside additional border formalities, Customs Duties may be payable on certain goods. This Duty is not reclaimable like VAT. Most of the complexities of Customs Duty relate to the rules of origin.

Commentary

PA is a relief for businesses importing from the EU. It is a simple system and will be familiar to any business which applies Reverse Charges. With all the varying changes applying post-Brexit, this is one area which should not affect a business importing from the EU in terms of port delays or negative cash flow. To date, there is no evidence on how well the system is working, but anecdotally, I understand that this part of Brexit changes has not thrown up any issues, unlike other problems which have been widely reported. I stand to be corrected though.  

VAT: New gov.uk EORI tool

By   21 January 2021
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Gov.uk has provided a new tool to check a business’ EORI number. (This used to be an EC resource now not available due to Brexit).

A guide to EORI here

A business may need to demonstrate to HMRC that it has carried out proper due diligence in certain cases.

Contact

If you have queries, or would like to obtain specific EORI advice, contact the HMRC EORI team using the online form

Access

Who has access to an EORI number?

The general public can access limited data, When a business is notified of its EORI number, it will be asked whether it objects to this data being published on the site.

VAT: New HMRC guidance on duty deferment and guarantee waivers

By   3 November 2020
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HMRC has published guidance on a number of issues relating to duty and guarantee waivers:

  • How to apply for duty deferment when importing goods. This will apply to businesses bringing in goods from the EU from 1 January 2021. This means that the duty and customs payments may be delayed

We recommend any business importing goods checks all the requirements and puts plans in place to defer VAT, duties and customs payments wherever possible. Despite political promises, this significant additional red tape as a result of Brexit helps nobody and will be a costly burden.  However, at least the government have put a structure in place which will aid cashflow.

VAT: New guidance on the border with the EU post-Brexit

By   14 October 2020
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This month the government have issued new guidance: The Border with the European Union Importing and Exporting Goods on the Border Operating Model. This provides comprehensive guidance on the movement of goods from 1 January 2021 and adds to previous guidance.

This is important information for any business moving goods between GB, the EU and NI and needs to be considered for tax planning and general preparation for Brexit. These rules will likely come into force regardless of whether the UK has negotiated an agreement with the EU.

The introduction comes in three stages:

  • Stage One – January 2021
  • Stage Two – April 2021
  • Stage Three – July 2021

Stage One

Business will need to:

  • understand the requirements of EU Member States. The necessary processes must have been done and documentation completed to comply with these requirements
  • obtain a GB EORI number to move goods to or from the UK
  • if undertaking any EU customs processes, businesses will need an EU EORI
  • importers; check which goods are on the controlled goods list- if they are on the controlled goods list, a full customs declaration is required
  • if importing non-controlled goods, decide whether to delay the customs declaration for up to six months or complete full customs declarations on import
  • decide how to complete customs formalities: Most businesses are expected to use a customs intermediary
  • consider obtaining a Duty Deferment Account (DDA). A DDA allows holders to delay customs duty, excise duty and import duty, to be paid once a month rather than on individual consignments
  • check to see if a facilitation would be of benefit. There are a number of facilitations, including the Common Transit Convention
  • if importing live animals or high-priority plants, business needs to be prepared for submitting additional documentation and checks taking place at point of destination
  • exporters; be prepared to submit customs export declarations
  • hauliers; be ready to use the “Check an HGV is ready” service

Stage Two

If businesses are importing Products of Animal Origin (POAO) or a regulated plant and plant product; they will need to:

  • to submit pre-notification and the relevant health documentation

Stage Three

Businesses must:

  • meet full customs requirements including submitting declarations, regardless of whether it is a controlled or a non-controlled good
  • pay VAT and excise duty where necessary
  • submit safety and security declarations
  • be prepared for customs compliance checks either at port or an inland site
  • be prepared for relevant SPS goods to enter GB via a Border Control Post either at port or an inland site, accompanied by sanitary and phytosanitary (SPS) documentary requirements

General

From 1 January 2021

  • Customs Declarations – Importers and exporters will have to complete UK and EU customs declarations after the end of the transition period. Some locations will require pre-lodgement of customs declarations prior to the movement of goods, which will particularly affect ‘roll on-roll off’ (RoRo) movements
  • Customs Duties – Importers will need to ensure that any customs duties applicable to their goods under the new UK Global Tariff are paid. Importers will need to determine the origin, classification and customs value of their goods. There are options available to defer any payment that is due
  • VAT will be levied on imports of goods from the EU, following the same rates and structures as are applied to Rest of World (RoW) imports. VAT registered importers will be able to use postponed VAT accounting. Non-VAT registered importers have the same options available to report and pay import VAT as they do for customs duties

Businesses will need to review their processes for dealing with cross-border goods, both between the EU and Northern Ireland. This includes; customs declarations, compliance, provision of data, obtaining a duty deferment account and GB/EU EORI numbers as necessary. We also advise liaising with suppliers and customers to ensure, as far as possible, that transactions are as seamless as possible in these challenging times.

Government Freeports consultation

By   14 February 2020
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The Government is consulting on plans to create up to ten freeports. Freeports may provide tariff flexibility, customs facilitations and tax measures designed to encourage global trade and attract inward investment post-Brexit. The proposed Freeports will have different customs rules to the rest of the country.

What is a Freeport?

Freeports are secure customs zones located at ports where business can be carried out inside a country’s land border, but where different customs rules apply. The paper says that Freeports may:

  • reduce administrative burdens and tariff controls
  • provide relief from duties and import taxes
  • ease tax and planning regulations
  • offer simplifications to normal customs processes on imported goods
  • encourage global trade
  • provide hotbeds for innovation
  • increase prosperity areas surrounding Freeports by generating employment opportunities
  • attract inward investment post-Brexit

Typically, goods brought into a Freeport do not attract a requirement to pay duties until they leave the Freeport and enter the domestic market. No duty at all is payable the goods are re-exported. If raw materials are brought into a Freeport from overseas and processed into a final good before entering the domestic market, then duties will be paid on the final good.

Government aims

It is stated that the government wants Freeports to boost trade, jobs and investment. They say that is why they are proposing cutting red tape by streamlining customs processes, exploring the use of planning measures to speed up planning processes and accelerate development and housing delivery in and around Freeports, and consulting on a comprehensive set of tax breaks to support businesses. Of course, all this would be unnecessary if Brexit had not have occurred.

Deadline

The consultation deadline is 20 April 2020 so there is not a lot of time to make your views known.







VAT: Preparing for a No Deal Brexit. A checklist

By   13 February 2019
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A guide for Customs, Excise and VAT for exporters

This is a brief overview of certain issues that an exporter needs to consider if, as seems increasingly likely, there is a No Deal Brexit. There are a number of helpful links to assist. This could be an enormous change. HMRC estimate the number of customs declarations will rise from 55m to 255m annually and the EU requires eight copies of each customs declaration.

UK businesses need to plan for Customs and VAT processes, which will be checked at the EU border. They should check with the EU or Member State the rules and processes which need to apply to their goods.

Distance selling arrangements will no longer apply to UK businesses and UK businesses will be able to zero rate sales of goods to EU consumers. Current EU rules would mean that EU Member States will treat goods entering the EU from the UK in the same way as goods entering from other non-EU countries, with associated import VAT and customs duties due when the goods arrive into the EU.

Checklist

  • Get an EORI number
  • Check if you can use transitional simplified procedures
  • Apply the correct customs procedure code
  • Identify the UK tariff codes for all your products by searching trade tariffs on gov.uk. A tariff code allows you to:
    • complete declarations and other documentation
    • check if there is duty or VAT to pay and any potential duty reliefs
  • If you use a UK roll on roll off location you will need to declare your goods before they board the ferry or train
  • Pay Customs Duty on goods
  • Research the destinations you want to export to. This background information, along with the commodity code of the goods will enable you to establish if goods will incur import duty in the destination country
  • Check if you need a licence to import or export your goods
  • Obtain software or an agent to make declarations
  • Identify what documentary requirements apply for your products when exported to EU countries by searching the EU Commission Market Access Database. (When choosing a market, you cannot currently select the UK so, assuming the UK would have no tariff preferences under a no-deal scenario, select a country such as the US or China, where no preferential arrangements exist, to establish a comparable level of duty your product would face)
  • Check for updates. Check the EU Brexit Preparedness portal, to understand the potential outcomes for your sector
  • Check the origin of all products when exported to, or imported from EU countries. Identify the UK/EU/non-EU content (including all components and raw materials) and whether your goods may qualify as being of UK or EU origin. Access further information on rules of origin
  • Customs delay – If working in time sensitive sectors, consider how your EU customers may be affected by customs delays. These may include; just-in-time practices, timed deliveries and potential penalties and short shelf-life goods
  • Identify EU customers and suppliers who are cost-sensitive and who might be reluctant to pay more for goods with the addition of import duties, customs clearance costs, higher freight costs, or currency fluctuations.
  • Identify exports to countries which have Free Trade Agreements (FTA) with the EU. Are they dependent on duty preferences or other FTA provisions? Consider the implications, particularly where main competition is with other EU businesses
  • Access details of which countries have FTA with the EU
  • Identify purchases from other countries which have FTA or Generalised System of Preferences (GSP) agreements with the EU.
  • Identify sales to EU customers who incorporate those goods into their products, for re-export to countries with FTAs. Check whether supplier declarations are provided
  • Cash flow – Consider protecting against foreign exchange fluctuations within your business
  • Map and audit supply chains. Even if a company is ready for Brexit, it will be disrupted if a supplier is not prepared and cannot meet its contracts
  • Check international contracts and renegotiate if required. Some intra-EU contracts will not include incoterms, the legal provisions for importing and exporting that define who is responsible for shipping goods across borders
  • Develop a contingency plan – There is no guarantee that border procedures will operate smoothly immediately after Brexit, and businesses may need a contingency plan in case systems fail
  • Stay up to date by registering for HMRC’s EU Exit update service www.gov.uk/hmrc/business-support, select ‘business help and education emails’, add your email address, select ‘Submit’, select ‘Add subscription’, choose ‘EU Exit’ then ‘Submit’
  • Customs checks – Establish what level of risk of physical or documentary examination might apply for your goods imported from, or exported to EU countries
  • For goods being exported to the EU which are not “wholly obtained” in the UK, and which have undergone processing in another third country as part of their production, it is important to understand the supply chain of components going into the product.  Goods with components coming from non-UK countries will mean that that product is not able to benefit from any continued zero-tariff trade with the EU unless arrangements are put in place between the EU and UK

I hope that this is helpful. Please contact us if you have any queries.







Combined Nomenclature – 2019 version published

By   5 November 2018
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The European Commission (EC) has published the latest version of the Combined Nomenclature (CN) applicable from 1 January 2019.

The CN forms the basis for the declaration of goods

  • at importation or exportation or
  • when subject to intra-Union trade statistics

This determines which rate of Customs Duty applies and how the goods are treated for statistical purposes. The CN is a vital working tool for business and the Member States’ Customs administrations.

The CN is updated every year and is published as a Commission Implementing Regulation in the Official Journal of the European Union.

The latest version is now available as Commission Implementing Regulation (EU) 2018/1602 in EU Official Journal L 273 on 31 October 2018 and applies from 1 January 2019.

Businesses which import, and/or export need to be aware of any changes as they could affect the amount of Customs Duty payable. We recommend that such a business’s import/export agent or carrier should be contacted in the first instance.







Changes to the import of goods

By   10 August 2018
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If a business imports goods from countries outside the EU, there are changes being made by HMRC which it needs to beware of. If a business currently uses the UK Trade Tariff to make Customs declarations it will be affected by these changes.

The changes are set out here for imports. We understand that the changes for exports will be made available later in the year.

If a business’ agent or courier completes its declarations on its behalf, it may be prudent for a business to contact them discuss the impact of the changes.

Background

An overview of the changes may be found here

And a general guide to importing here

Why is the Tariff changing?

HMRC is phasing in the new Customs declaration Service (CDS) here from August to replace the current Customs Handling of Import and Export Freight (CHIEF) system. As well as being a modern, digital declaration service, CDS will accommodate new legislative requirements under the Union Customs Code UCC here In order to comply with the UCC, a business will need to provide extra information for its declarations which can be found in the tariff.

When will a business be required to use the new Tariff?

The majority of importers will start using CDS after November 2‌018, once their software provider or in-house software team has developed a CDS compatible software package. Some importers will start making declarations on CDS before this, but there is no action for a business to take unless it has been contacted by HMRC to be part of this group.

Brexit

As is very common with Brexit, it is unknown how the UK leaving the EU will affect this position. With a No-Deal Brexit seeming likely, the above rules are likely to apply to goods brought into the UK from other EU Member States after next March.

Please contact us should you have any queries.







UCC extension of time to implement systems

By   5 March 2018
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The Union Customs Code (UCC) is part of the modernisation of customs and serves as the new framework regulation on the rules and procedures for customs throughout the EU.

On 2 March 2018, the EC proposed that Customs authorities and economic operators be allowed to continue using already existing systems for the completion of certain customs formalities until 2025 at the latest. While most of the new or upgraded electronic systems that are necessary to apply the provisions of the UCC will be operational by 2020, some electronic systems may not be fully completed until 2025. Therefore this proposal would ensure that, in the case of the small number of customs formalities to be managed by the electronic systems that will not be completed by 2020, already existing electronic systems or paper-based procedures can continue to be used until the new systems are ready.

Full details of the latest proposals here

More on the background of how UCC affects UK importers and exporters here







Imports – The jargon explained

By   1 March 2018
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The minefield of importing

VAT is only one consideration when importing goods.

Further to my article on proposed changes to imports and exports I have been asked what some terms used in the import of goods mean. So below is, what I hope, a helpful explanation of UK import terms.

We are happy to assist with any general queries and we provide a comprehensive Customs Duty service via our associates with specialised, in-depth knowledge of this complex area.

We recommend regular reviews of a business’ import procedures. This may highlight deficiencies but also provide opportunities to save money or improve cashflow.

Term Description
Anti-Dumping Duty A customs duty on imports providing a protection against the dumping of goods in the EU at prices substantially lower than the normal value
ATA carnet An international customs document for temporary importation and exportation regulated under the terms of the ATA or Istanbul Convention
C 88 (SAD) The UK version of the Single Administrative Document (SAD) for making import, export and transfer declarations
CAP Common Agricultural Policy
CDS Customs Declaration Service to be launched from August 2018. Replaces CHIEF
CFSP (Customs Freight Simplified Procedures) Simplified procedure for the importation of third country goods including the simplified declaration procedure and local clearance procedure
CHIEF (Customs Handling of Import and Export Freight). The Customs entry processing computer system. Soon to be replaced
CIE Customs input of entries to CHIEF
Community Member States of the European Union
Community Transit A customs procedure that allows non EU goods on which duty has not been paid to move from one point in the EU to another
Countervailing duty A customs duty on goods which have received government subsidies in the originating or exporting country
CPC (Customs Procedure Code) A 7-digit code used on C88 (SAD) declarations to identify the type of procedure for which the goods are being entered and from which they came. Details of CPCs can be found in The Tariff
Customs charges customs duties
import VAT
specific customs duty (previously CAP charges)
Anti-Dumping Duty
Countervailing Duty
excise duties
Customs duty An indirect tax that provides protection for Community industry. Raised on imported goods, it does not include excise duty or VAT
Customs warehouse A system or place authorised by customs for the storage of non-Community goods under duty and/or VAT suspension
EU European Union
EU Country Member country of the European Union
Euro (€) European currency unit
Excise duty A duty chargeable, in addition to any customs duty that may be due, on certain goods listed in The Tariff, volume 1 part 12 paragraph 12.1
Free Circulation Goods imported from outside the EU are in free circulation within the EU when:

all import formalities have been complied with

all import duties, levies and equivalent charges payable have been paid and have not been fully or partly refunded

goods that originate in the EU are also in free circulation
Free Zone A designated area into which non-EU goods may be moved and remain without payment of customs duty and/or VAT otherwise due at importation
INF6 (C1245) Information sheet 6 is a document used when TA goods travel between EU Countries. It provides details of the goods at the time of their first entry to TA in the EU. It does not replace the C88 (SAD)
IP (Inward Processing ) A customs procedure providing relief from import duty on goods imported to the EU or removed from a customs warehouse, for process and export outside the EU
Member State Member country of the European Union
PCC (Processing under Customs Control) A system of import duty relief for goods imported or transferred from another customs regime for processing into products on which less or no duty is payable
Person established in the EU In the case of a natural person, any person who is normally resident there.

In the case of a legal person or an association of persons, any person that has, in the EU:

its registered office
its central headquarters
or
a permanent business establishment
Person established outside the EU In the case of a natural person, any person who is not normally resident there.

In the case of a legal person or an association of persons, any person that has, outside the EU

its registered office
its central headquarters
or
a permanent business establishment
Pre-entry Notification to customs of your intention to export the goods by the submission of an entry
Preference Arrangements which allow reduced or nil rates of customs duties to be claimed on eligible goods imported from certain non-EU countries
SAD (Single administrative document) Document used throughout the EU for making import/export declarations – the UK version is Form C88
TA goods Temporary Admission goods
Tariff The Tariff consists of 3 volumes

Volume 1
contains essential background information for importers and exporters, contact addresses for organisations such as Department for Business, Innovation and Skills, Department of Environment, Food and Rural Affairs and Forestry Commission. It also contains an explanation of Excise duty, Tariff Quotas and many similar topics

Volume 2
contains the 16,000 or so Commodity Codes set-out on a Chapter by Chapter basis. It lists duty rates and other directions such as import licensing and preferential duty rates

Volume 3
contains a box-by-box completion guide for C88 (SAD) entries, the complete list of Customs Procedure Codes (CPCs), Country / Currency Codes, lists of UK ports and airports both alphabetically and by their legacy Entry Processing Unit (EPU) numbers, and further general information about importing or exporting.

The Tariff is available on an annual subscription and is also available at some larger libraries. You can buy the Tariff in printed and CD ROM formats or subscribe to the new e-service from the Stationary Service referred to in paragraph 1.5
Third country Any country that is outside the Customs Territory of the EU

It is likely that some of these terms will change in the future and with the uncertainty of Brexit who knows what changes will be required.