This Guidance provides examples to help with the completion of declarations on the Customs Declarations Service for exports. It has been updated with the addition of a standard pre-lodged export declaration document.
Tag Archives: customs-duty
VAT – A Christmas Tale
Well, it is nearly Christmas…. and at Christmas tradition dictates that you repeat the same nonsense every year….
Dear Marcus
My business, if that is what it is, has become large enough for me to fear that HMRC might take an interest in my activities. May I explain what I do and then you can write to me with your advice? If you think a face to face meeting would be better, I can be found in most decent sized department stores from mid-September to 24 December.
First of all, I am based in Greenland, but I do bring a stock of goods, mainly toys, to the UK and I distribute them. Where do I belong? Am I making supplies in the UK? Do I pay Customs Duty?
If I do this for philanthropic reasons, am I a charity, and if so, does that mean I do not pay VAT?
I have heard that giving vouchers can be complicated, I think I will need help with these gifts.
The toys are of course mainly for children and I wonder if zero rating might apply? I have heard that small T shirts are zero rated so what about a train set – it is small and intended for children. Does it matter if adults play with it? My friend Rudolph has told me that there is a peculiar rule about gifts. He says that if I give them away regularly or they cost more than £50 I might have to account for output tax. Is that right?
My next question concerns barter transactions. Fathers often leave me a food item such as a mince pie and a drink and there is an unwritten rule that I should then leave something in return. If I’m given Sainsbury’s own brand sherry, I will leave polyester underpants but if I’m left a glass of Glenfiddich I will be more generous and leave best woollen socks. Have I made a supply and what is the value please? My feeling is that the food items are not solicited so VAT might not be due and, in any event; isn’t food zero-rated, or does it count as catering? Oh, and what if the food is hot?
Transport is a big worry for me. Lots of children ask me for a ride on my airborne transport. I suppose I could manage to fit twelve passengers in. Does that mean my services are zero-rated? If I do this free of charge will I need to charge Air Passenger Duty? Does it matter if I stay within the UK, or the EU or the rest of the world? What if I travel to every country? My transport is the equivalent of six horsepower and if I refuel with fodder in the UK will I be liable for fuel scale charges? After dropping the passengers off I suppose I will be accused of using fuel for the private journey back home – is this non-business? Somebody has told me that if I buy hay labelled as animal food I can avoid VAT but if I buy the much cheaper bedding hay I will need to pay tax. Please comment.
May I also ask about VAT registration? I know the limit is £85,000 per annum but do blips count? If I do make supplies at all, I do nothing for 364 days and then, in one day (well, night really) I blast through the limit and then drop back to nil turnover. May I be excused from registration? If I do need to register should I use AnNOEL Accounting? At least I can get only one penalty per annum if I get the sums wrong.
I would like to make a claim for input tax on clothing. I feel that my red clothing not only protects me from the extreme cold, but it is akin to a uniform and should be allowable. These are not clothes that I would choose to wear except for my fairly unusual job. If lady barristers can claim for black skirts, I think I should be able to claim for red dress. And what about my annual haircut? That costs a fortune. I only let my hair grow that long because it is expected of me.
Insurance worries me too. You know that I carry some very expensive goods on my transport. Play Stations, mountain bikes, i-Pads and Accrington Stanley replica shirts for example. My parent company in Greenland takes out insurance there and they make a charge to me. If I am required to register for VAT in England will I need to apply the Reverse Charge? This seems to be a daft idea if I understand it correctly. Does it mean I have to charge myself VAT on something that is not VATable and then claim it back again?
And what about Brexit? I know the UK has already left the EU, but does this affect me? What about distance selling? How do I account for supplies to and from the EU? Will there be Tariffs? Do I have to queue at Dover?
Next, you’ll be telling me that Father Christmas isn’t real……….
HAPPY CHRISTMAS EVERYBODY!
VAT: Trader Support Service extended to December 2023
HMRC has announced that the Trader Support Service for businesses moving goods between Great Britain and Northern Ireland has been extended until 31 December 2023.
This service is designed to assist businesses navigate changes to the way goods move under the Northern Ireland Protocol since Brexit.
The service provides support to manage digital declarations including completing import and safety and security declarations.
It also provides guidance and training to help businesses understand what the Protocol means for them, enables traders to complete declarations without the need to purchase specialist software saving time and money.
Businesses moving goods between Great Britain and Northern Ireland can sign up to the Trader Support Service and access free online courses and training materials.
VAT & Customs Duty: Goodbye CHIEF, hello CDS
Businesses who import into the UK currently use Customs Handling of Import and Export Freight (CHIEF) to declare goods.
There is also a separate scheme running concurrently, known as Customs Declaration Service (CDS).
From 1 October 2022 CHIEF will cease and importers must use CDS.
Exports
CHIEF is also currently used for exports and this will continue to a later date of: 31 March 2023.
Action
This change will significantly affect all businesses which import goods. Although it is likely that import agents will handle the majority of issues, an importer will be required to:
- subscribe to the Customs Declaration Service
- manage your email address for the Customs Declaration Service
- chose a payment method
- give customs agents customs clearance instructions
- if duty deferment is used it is necessary to set up a new direct debit for CDS
Failure to comply with these requirements will result in a business being unable to import goods.
VAT & Customs Duty – Valuation for import purposes
Methods of calculating import value
There are six methods for calculating the value of imported goods to assess the amount of Customs Duty and import VAT a business to pay. The same value is also used for trade statistics.
All six methods are outlined below and should be tried in order. If Method 1 does not apply, try Method 2. If that does not apply, try 3 and so on. However, Method 5 can be tried before 4.
Method 1
The transaction value – the price payable to the seller. This is the most common valuation and is used in most cases.
Try Method 2 if there has been no sale of goods.
Method 2
The customs value of identical goods, produced in the same country as the imports.
Try Method 3 if there are no identical goods.
Method 3
The customs value of similar goods, which must be:
- produced in the same country
- able to carry out the same tasks and be
- commercially interchangeable
Try Method 4 if there are no similar goods.
Method 4
The selling price of the goods (or identical or similar goods) in the UK.
Try Method 5 if there are no UK sales of the goods.
Method 5
The production cost of the goods, including the cost of any materials, manufacturing and any other processing used in production.
Try Method 6 if this production cost information is unavailable.
Method 6
Reasonably adapting one of the previous methods to fit unusual circumstances.
Legislation
In the UK valuation is covered by the Taxation (Cross-border Trade) Act 2018 & The Customs (Import Duty) (EU Exit) Regulations 2018 and The VAT Act 1994, Section 19.
What to include in the Method 1 calculation
If they are not already included in the seller’s price, the importer must add the costs of:
- delivery to the EU border
- most commissions (except buying commission)
- royalties and licence fees paid by you on the imported goods as a condition of sale
- containers and packing
- any proceeds of resale the seller will receive
- goods and services you provide to the seller for free or at a reduced cost – eg components incorporated in the imported goods, or development and design work carried out outside the EU and necessary for the production of the imports
If you import goods from a processor – ie a business that assembles or otherwise works on one or more sets of existing products to create your new imported products – transaction values can be built up by adding to the processing costs the value of any materials or components you provided to the processor.
What to exclude from your calculation
Items to be left out of the customs value if certain conditions are met include:
- delivery costs within the EU
- EU duties or taxes
- taxes paid in the country of origin or export
- quantity and trade discounts and those relating to cash and early settlement, that are valid at the time the goods are valued
- dividend payments to the seller
- marketing activities related to the imports
- buying commission
- export quota and licence costs
- interest charges
- rights of reproduction
- post-importation work, eg construction or assembly
- management fees
Further details here.
VAT: Trading with the EU from 1 January 2022
Further to my article on the new changes from next year, HMRC has published information on the rules of origin for trade between the UK and EU.
The Bulletin covers the rules of origin and the forthcoming changes to the requirement for supplier declarations to support proof of origin.
VAT: HMRC – Customs changes from 1 January and 1 July 2022
Further to my article on new procedures, HMRC has issued a reminder of customs changes that come into effect on 1 January 2022.
It is now less than a month until full controls are introduced.
The Changes
- Customs declarations
Businesses will no longer be able to delay making import customs declarations under the Staged Customs Controls Most importers will have to make declarations and pay relevant tariffs at the point of import.
- Border controls
Ports and other border locations will be required to control goods moving Great Britain and the EU. This means that unless goods have a valid declaration and have received customs clearance, they will not be able to be released into circulation, and in most cases will not be able to leave the port. From 1 January 2022, goods may be directed to an Inland Border Facility for documentary or physical checks if these checks cannot be done at the border.
- Rules of origin for imports and exports
The UK’s deal called the Trade and Cooperation Agreement (TCA), means that the goods imported or exported may benefit from a reduced rate of Customs Duty (tariff preference). To use this a business will need proof that goods which are:
. imported from the EU originate there
. exported to the EU originate in the UK
- Commodity codes
Commodity codes are used worldwide to classify goods that are imported and exported. They are standardised up to six digits and reviewed by the World Customs Organisation every five years. Following the end of the latest review, the UK codes will be changing on 1 January 2022. HMRC guidance is available on finding commodity codes for imports into or exports out of the UK which includes information on using the ‘Trade Tariff Tool’ to find the correct commodity codes.
- Postponed VAT Accounting
A VAT registered importer is able to continue to use Postponed VAT Accounting (PVA) on all customs declarations that are liable to import VAT (including supplementary declarations).
Further changes from 1 July 2022
The following changes will be introduced from July 2022:
- requirements for full safety and security declarations for all imports
- new requirements for Export Health Certificates
- requirements for Phytosanitary Certificates
- physical checks on sanitary and phytosanitary goods at Border Control Posts
Businesses must be prepared for these changes and I recommend that an experienced representative is used.
VAT: Trading with the EU. Changes from 1 January 2022
From 1 January 2022 the rules for selling to, and buying from, the EU will change.
HMRC have issued information about these changes.
Broadly, from 1 January 2022, businesses will no longer be able to delay making import customs declarations under the Staged Customs Controls rules that have applied during 2021. Most businesses will have to make declarations and pay relevant tariffs at the point of import. However, see details of Postponed Accounting.
Please also see a publication issued by the Cabinet Office which includes a Policy Paper on The Border Operating Model.
VAT: Postponed Accounting
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
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.