Importer Caught Out by Sudden Increases to Duty Costs
A recent Tax Tribunal case of Manchester Candle Company (MCC) v HMRC outlines the dangers of significant additional duties turning overseas purchases into significant losses.
The MCC purchased candles from a supplier in China in and agreed for delivery to be made in 6 batches.
The imposition of ADD on Chinese Candles meant that MCC could not carry on selling the candles for profit and so it cancelled their final order batch and had to forfeit its deposit. The appeal concerned whether MCC would have to pay duty on a batch of candles that left China after the imposition of ADD but were imported in to the EU after the ADD measures took effect.
The tax Tribunal of Forth Wines v HMRC ruled that HMRC approach to an application for Simplified Import VAT Arrangements (SIVA) was wrong.
Most businesses that import on a regular basis use a duty deferment account to pay any customs duties and import VAT. These arrangements:
• Provide cash-flow savings by enabling you to pay customs duties and import VAT on the 10th day of the month following import • Make it easier to clear goods • Provide a useful record against which to reconcile your imports
60 Second Guide to Customs Compliance & Risk Management
What Every Finance Executive Needs to Know About Customs Compliance
Customs risk can be understood in the context of likelihood of something going wrong and the impact of any errors or mistakes.
Likelihood
Customs compliance is subject to audit based control and so the fact that goods have been cleared through customs is no indication that you have met your compliance obligations. Customs transactions are open for three years.
Statistics from the National Audit Office show that only 2-3% of imports are inspected, that 6% of importers are subject to audits each years and that 39% of these visits result in identification of compliance errors.
The proposed code was due to come in to effect in July 2013 but will require a considerable investment by all Member States in compatible software to support the increased use of electronic reporting, harmonised application of the customs provisions and risk management. Current economic conditions and difficulties in ensuring compliance with the Lisbon Treaty have made the 2013 unrealistic.
Compensatory interest is charged on Inward Processing Relief (IPR) Suspension goods to prevent businesses who divert goods to the EU market gaining a cash-flow advantage. In our experience, businesses are not seeking a cash-flow advantage but end up releasing some goods to the EU market because it is difficult to predict with accuracy the split of EU and non-EU sales.
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"I have worked with Rob on complicated HMRC issues. Aswell as direct assistance, Rob has provided excellenttraining for operational staff. I recommend ITS."
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"ITS helped us to reach a successful conclusion when HMCustoms tried to reject our proposed changes by usingtechnicalities."
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"Rob has provided customs advice on many occasions,always demonstrating deep knowledge of his subject tohelp the business mitigate its duty liabilities."
Stuart Reid, Financial Director Komatsu UK
"ITS have highlighted significant cost savingopportunities."
CW Winter, Financial Controller Special Metals Wiggin Ltd.
