How does customs duty work?
Your imports of goods in to the European Union are subject to customs control and may attract customs duty. Customs duty rates vary between 0%-229% with an average duty rate of 5.4%. You will also have the administrative costs of submitting declarations and managing your regulatory obligations. According to a recent study customs is the third largest administrative tax burden faced by UK business.
You must declare all movements in and out of the European Union to the customs authorities on a customs declaration containing 54 data elements. In practice, you are likely to engage a freight forwarder to complete this form on your behalf. However, you will be solely liable for any customs duties or penalties for any errors.
You need to pay any customs duties and import VAT before the customs authorities release the goods although these charges can be paid on the 15th of the following month if you are authorised to use a duty deferment account.
Customs duty is usually an absolute sticking cost. Import VAT is usually recoverable by VAT registered businesses and is commonly regarded as a cash-flow cost.
Your customs compliance is subject to audit based control. The customs authorities can examine any imports and exports you made in the previous three years so you will need to keep the necessary records and documents for a period of four years. You may face significant penalties for making errors or failing to meet your obligations.