Re-Classifying to a Lower Duty Rate: Knocking Down
Beta Limited imports finished amplifiers for use with electric guitars from the US, again mainly for the domestic market.
The amplifiers are classified under a commodity code which attracts duty at 4.1% and Beta is paying £250,000 of duty each year.
Further discussions reveal that 80% of the value of the amplifiers relates to a small integrated circuit, which acts as the brains of this technically advanced product. The integrated circuit if imported on its own is free of customs duty.
Beta decides to import the integrated circuits separate from the rest of the amplifier and install it in the UK, which will cost £30,000 each year. In doing so, it will save £200,000 a year in customs duties.
In order to obtain legal certainty that its planning will work, Beta applies for legal rulings, known as BTI, which will cover the situation for 6 years and even offer some protection if the underlying law is changed.
With over 128,000 different commodity codes in existence, the scope for the above two types of planning is significant.