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Customs Talks: Inward Processing in the UK – It’s all about accurate data!

Published on: 30 maart 2023
Type of publication Insight
Related topics

If your business is active in international trade, it is crucial that you are aware of all the local administrative regulations and obligations. Many countries have specific schemes or authorisations that make international trade easier from a practical or administrative point of view. Even so, strict adherence to the relevant rules is crucial, as was made apparent in a recent tribunal decision in the United Kingdom. Although the administrative error in that case was minor, the consequences were far-reaching.

UK IPSP Bill of Discharge: minor inaccuracies, major consequences

The UK Inward Processing Special Procedure can be administered by a company that operates a full Inward Processing (IP) authorisation. This authorisation makes it possible to import goods without customs duties being due immediately. Any business operating with an IP must adhere to the specific requirements set out in its authorisation letter. One of these requirements relates to the submission of a Bill of Discharge (BoD), which is required to confirm that the goods were imported into the UK under IP, and to confirm the manner in which the goods were disposed of or discharged.

In the decision at hand, the Tribunal confirmed that HMRC (the British Tax Authorities) was correct in raising a customs debt for all imports on a BoD where inaccuracies were identified. The full content of the BoD was therefore subject to customs duties, despite the fact that the inaccuracies did not affect all items on that bill. This resulted in a total customs debt of almost GBP 9 million.

The case in more detail

HMRC raised an assessment for GBP 2,409,009.91 customs duty and GBP 6,480,265.52 VAT, due to a breach of the obligations under providing accurate Bill of Discharges between March and December 2014. The errors identified by HMRC related to the following:

  • The commodity code was incorrectly declared on the import entry, but the commodity code on the BoD is correct. Breach due to no Post Clearance Action (PCA) completed.

  • There was a difference between the weight or customs values recorded on the Management Support System (“MSS”) and the weight shown on the BoD.

  • The import entry on MSS was cancelled and a PCA made but the cancellation was not made clear on the BoD.

  • Errors relating to incorrect import stock recorded, resulting in incorrect export quantities declared on BoD.

  • Failure to report the disposal of a quantity of import goods.

The critical element of this case related to the fact that HMRC determined that any error found on a BoD causes a breach resulting in a customs debt. A single error may therefore lead to liability for the customs duties on all individual imports stated on the BoD.

To read more about this case, we refer to the publication on the website of MHA, the Baker Tilly International member firm in the United Kingdom.

Accuracy is key!

Any business involved with operating Inward Processing into the UK must be vigilant and ensure that its processes are such that any information submitted on a BoD is relevant and 100% accurate. The same applies to similar schemes and authorisations within the European Union and elsewhere.

If your company operates Inward Processing, we would be happy to discuss how we can help you to ensure that your business has the necessary controls in place to minimise the risk of incurring a customs debt.

Would you like to know more about the customs and VAT obligations relating to the flow of goods in which your company is involved? Our experts would be happy to assist you. Please contact us.

The legislation and regulations in this area may be subject to change. We recommend that you discuss the potential impact of this with your Baker Tilly consultant.