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
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: 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.
VAT: New HMRC guidance on duty deferment and guarantee waivers
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
- How to apply for a guarantee waiver for duty deferment payments. More on guarantee waivers, including making amendments here.
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: Preparing for a No Deal Brexit. A checklist
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
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.
VAT and Customs Duty – Impact of No-Deal Brexit
HMRC has published guidance on the likely implications of a No-Deal Brexit. The guidance states that it is “unlikely” that the UK will leave the EU without a deal, however, in the recent political climate, observers comment that a No-Deal scenario is increasingly likely (to put it conservatively). Consequently, business must be in a position to deal with a No-Deal from 29 March 2019. The guidance may be summarised as follows:
Current position
- VAT is payable by businesses when they bring goods into the UK. There are different rules depending on whether the goods are acquisitions (EU) or imports (non-EU)
- no requirement to pay VAT when goods from the EU arrive in the UK. A business acquiring goods from the EU accounts for VAT on the goods in its next VAT return, offsetting input tax against output tax (acquisition tax, a simple “reverse charge” bookkeeping exercise)
- no Customs Duty on goods moving between EU Member States
- goods that are exported by UK businesses to non-EU countries and EU businesses are UK VAT free
- goods that are supplied by UK businesses to EU consumers have either UK or EU VAT charged, subject to distance selling thresholds
- for services the place of supply (POS) rules determine the country in which a business needs to charge VAT
From 29 March 2019 with a No-Deal Brexit
- the UK will continue to have a VAT system
- the government will attempt to keep VAT procedures as close as possible to the current systems
- acquisitions from the EU will become imports
- imported goods from the EU (or elsewhere) will be subject to VAT deferment
- Customs and Excise Duty formalities will now be required for EU imports
- UK businesses supplying digital services are likely to be required to register for the one stop shop (MOSS) in a country within the EU
- the rate of input recovery for providers of financial services (FS) and insurance may be improved
- Low Value Consignment Relief (LVCR) is likely to be abolished for goods entering the UK as parcels, whether from within or outside the EU.
- no requirement to comply with existing Distance Selling rules (exports of goods to individuals will be UK VAT free)
- EC Sales Lists will not be required
- Businesses need to take steps to examine their import and export procedures (!)
I have paraphrased some of the guidance for clarity and technical accuracy and the above points are not direct quotes.
Commentary
The apparent good news is that UK businesses importing goods from the EU will not have to pay VAT on the date that the goods enter the UK, but rather, will be able to account for the VAT later via a deferment system, presumably similar to the one in place for current non-EU imports. Helpful for cashflow, but an unwanted additional complexity, especially for small businesses. A concern is that HMRC cannot deal with the documentation requirements even before Brexit see here
A big negative for UK business is the fact that customs declarations and the payment of any other duties will now be required for imports from the EU – in the same way as currently applies when importing goods from outside the EU. Consequently, for goods entering the UK from the EU
- an import declaration will be required
- customs checks may be carried out
- customs duties must be paid.
This is an additional complication and a cost to a business which is currently able to bring goods into the UK from the EU without any of these declarations, payments or inspections. This is likely to lead to additional delays at the border and will certainly increase administration and costs. Whether this will encourage UK businesses to purchase more goods from UK suppliers remains to be seen. It is worth mentioning that HMRC has also said that UK importers need to take steps apply for an Economic Operator Registration and Identification Number (EORI) for businesses which do not already have one. Details here
Brexit may provide a ray of sunshine for FS and insurance suppliers (well for VAT anyway, the commercial impact may be somewhat different). In the event of a No-Deal Brexit, for UK FS and insurance providers, input VAT deduction rules in respect of services to the EU may be changed. Although no details are provided, it appears to me that input tax attributable to these supplies will be treated similarly to those currently provided to recipients outside the EU. Which will broadly mean that those supplies which would be exempt if provided in the UK would provide full input tax recovery if the recipient belongs anywhere outside the UK. This will be very good news for The City.
LVCR currently relieves goods worth under £15 which come into the UK from outside the EU from UK VAT. Its abolition means that all goods entering the UK as parcels sent by overseas businesses will be liable for VAT (unless they are zero-rated from VAT) if the value is under £15. An unwelcome and apparently unnecessary change.
Generally
It is prudent for businesses to consider how their imported goods will be classified and how they will submit import declarations in the result of a No-Deal Brexit. HMRC suggests that importers may want to consider looking at suitable commercial software and, or, engaging a commercial customs broker, freight forwarder or logistics provider. We advise contacting the relevant providers sooner, rather than later, to establish what you, or your client’s business may require. Of course, all of the above will increase the potential of a business receiving penalties and interest if it gets it wrong.
If you would like to discuss any of the above, please contact me, or a member of my team. Readers that know me, may admire my restraint in commenting, politically, on Brexit…
As I often find myself saying recently – good luck everybody.
Changes to the import of goods
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.
Beyblades – a Customs Duty case
Latest from the courts
In the Court of Appeal (CA) case of Hasbro European Trading BV (Hasbro) the issue was whether Customs Duty (CD) was due on the import of Beyblades. If they fall within the definition of a toy CD is payable at 4.7%. However, if they are more accurately classified as a game they are treated as duty free – so a significant difference in import cost dependent on what, superficially, appears to be a somewhat question of semantics.
Beyblades
For the purposes of the case, it is important to understand what a Beyblade is and how it is used.
Beyblade is the brand name for a line of spinning tops originally developed and manufactured by Tomy in Japan. The main novelty is that they are a series of items which are customisable, with interchangeable parts. A Beyblade is set in motion by means of a rip-cord powered launcher.
A “game” is played with two players. Each player is allowed a number of Beyblades to choose from during a match. Players may use any parts available to them to make their Beyblades), but may not switch parts once a match has started. The first player to reach seven points wins. Points are awarded to the player based on how their Beyblade knocks out the opponent’s
- One point is awarded if the opponent’s Beyblade stops spinning
- One point is awarded if the opponent’s Beyblade is knocked out of the stadium or into a pocket on the edge of the ring
- Two points are awarded if the opponent’s Beyblade breaks during a game
The Arguments
The case concerned the classification of Beyblades’. The appellant, Hasbro contended that Beyblades are correctly classified as “articles for … table or parlour games” under heading 9504 of the Combined Nomenclature. In contrast, HMRC maintained that Beyblades should be classified as “other toys” under heading 9503, The First-tier Tribunal FTT and the Upper Tribunal (U’) both previously agreed with HMRC’s analysis.
Classification
There are “explanatory notes” to the Harmonised System (HSENNs). The CA ruled that the classification rule which prefers the most specific description does not apply at the level of the HSENs: they are an important guide to interpretation, but do not have force of law.
The Decision
The CA allowed the appeal and went against the decisions in the FTT and UT. The judge concluded that “In the circumstances, it seems to me to fall to us to decide which of the alternative headings provides the more specific description. In my view, it is heading 9504. As I see it, “articles for … parlour games” encompasses a more limited range of goods than “toys” and “more clearly identifies Beyblades”, particularly since, as I say, “articles for … parlour games” reflects the fact that Beyblades are meant to be used in games…”. The fact that Beyblades are used in a competitive scenario seems to have swung the decision which knocked out HMRC. Consequently, there was no CD payable as they fell to be duty free.
Commentary
It does beg the question; why did this issue need to get to the CA for the appellant to finally win (but of course, this isn’t the first case which has raised that question). Perseverance was clearly the key word here. If you are convinced that HMRC is wrong on ay matter, it really does pay to challenge any ruling.
UCC extension of time to implement systems
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