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The Taxation UK (Cross-Border Trade) Act 2018, also known as the Customs Act, is a pivotal piece of legislation governing customs compliance in the UK for both domestic and overseas companies. Under this Act, the UK can levy customs duties on goods, even those imported from the EU, establish a UK trade preferences scheme for developing countries, and implement trade remedies to protect UK industries from harm caused by inexpensive imports. This Act also facilitates the continuity of existing trade agreements and the establishment of new ones with countries outside the EU.
HM Revenue and Customs (HMRC) enforce and implement this law. Alongside the Customs Act, businesses must comply with various other regulations and legislations that may affect their imports and exports, such as safety standards, licensing, and taxation laws.
Crucial elements of customs compliance encompass customs declarations and associated processes such as product classification, preferential or non-preferential origin, and customs valuation. These processes adhere to internationally established agreements and must follow a prescribed sequence. Internationally harmonised product classification, governed by the World Customs Organisation at a 6-digit level, allows countries to append their own measures and requirements at more specific levels by adding additional national tariffs. The approach to determining the country of origin is established globally through the World Trade Organisation framework. This approach encompasses specific procedures for free trade agreements and unique preferential rules of origin, or autonomously applied rules to certain products. Rules of valuation are agreed upon at an international level through the WTO Customs Valuation Agreement.
Keeping pace with changing regulations and applying correct entitlements or duties require a great deal of specialist knowledge. Three major bedrocks of customs compliance – Tariff Classification, Customs Valuation and Origin, need to be always correctly applied, checked, and monitored for any business involved in cross-border trade. MNE’s additionally need to have a well-defined transfer pricing policy to meet the latest guidelines of OECD and UN.
Customs compliance can be complex, given that international agreements are often interpreted differently by the customs authorities of different countries, leading to potential challenges. Businesses need to submit accurate customs declarations, detailing what is being imported or exported, its value, and country of origin, in a clear and understandable manner. Typically, customs declarations are submitted electronically using the UK's Customs Declaration System (CDS).
Upon declaration, businesses need to pay the relevant customs duties and taxes to maintain customs compliance. The rates can depend on the type of goods, their value, and their country of origin. Businesses should monitor payments accurately and report any discrepancies through voluntary disclosures, ensuring customs compliance and avoiding penalties.
To be customs compliant, companies are required to keep records of all imported and exported goods for six years. These records can be reviewed by HMRC, and businesses can face penalties for inaccurate records. Various timings are required for supporting documentation or controls related to excise, origin of goods, health and safety regulations. These requirements need to be supported and monitored in accordance with business data management and protection policies.
Understanding when VAT is due on imported goods and how to report and pay it is crucial. Similarly, knowing one's VAT responsibilities when exporting goods is essential. Tax compliance is closely related to customs compliance, and cooperation between the tax and compliance departments is paramount for achieving customs compliance.
Imported goods must meet the UK's safety and regulatory standards. This could involve having the correct safety certificates or meeting labelling requirements. The responsibility of ensuring goods are in compliance with UK product regulation and customs compliance falls on the person or entity first placing the product on the market, whether they are UK or foreign-based.
Exporters of goods are responsible for UK and sometimes overseas extraterritorial regulation if a transaction involves a foreign party or if the product contains overseas components. Good knowledge of customs compliance is an important part of the competitive advantage for firms who are proficient in export control and sanctions regimes.
HMRC conducts compliance checks on firms involved in cross-border international trade. This includes documentary and physical checks during the pre-lodgement stage or when crossing the border. Customs can inspect goods and documents related to transactions, ask questions about the services you provide, and verify your compliance with any customs-related approvals. HMRC also conducts checks after goods have been cleared for a number of transactions. Businesses will be notified about these checks and will be asked to provide information about specified imports or exports. Businesses are responsible for the cost of moving goods or taking samples for customs checks. HMRC can request access to accounts, bank records, import and export paperwork, contracts, goods specifications, and other business documents as necessary.
HMRC can also visit business premises to examine business records, inspect the premises and any goods on-site, and take samples to help classify and identify goods. If goods are found to be in violation of customs law, for instance if they are prohibited or if there is a high level of suspicion that goods have been smuggled in without paying tax and duty systematically, they can be detained or seized. Good recordkeeping, along with a thorough understanding of its requirements, plays a vital role in assuring preparedness for any future enquiries into current or past trade operations. It constitutes an integral aspect of customs compliance, and if addressed systematically, it can save businesses a significant amount of time and money.
Companies such as Tevolution Ltd can assist in the process of customs audits, either in an ongoing audit or in preparing a business for potential future audits. External audits carried out by Tevolution Ltd can help ensure a high level of customs compliance and establish correct processes. This can ensure that any potential areas of risk have been scrutinised by an independent party. The process of independent audit and verification is an important part of compliance management and forms a crucial element of the three lines of defence in a corporate risk management framework.
Overall, customs compliance in the UK is a detailed and precise process that requires a thorough understanding of UK and international law. It's crucial for businesses to get it right in order to avoid potential fines, delays, or disruptions to their operations. Many businesses choose to work with customs brokers or use customs software to help manage these tasks. Utilising customs compliance services from a company like Tevolution Ltd can help businesses maintain a seamless, uninterrupted flow of trade.
What we offer
We are a mission driven trade consultancy providing services to businesses in the UK and the EU. Agility, Innovation, and Resilience are amongst the major characteristics which we embed in our business strategies.
Air freight clearance
We are providing import and export clearance services in all major UK airports with most of the traffic in London Heathrow and London Gatwick.
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Road Freight Clearance
We are providing import and export clearance services in all major UK points of arrival and border crossings. We are a leading provider of clearance under CFSP and EIDR.
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Sea Freight Clearance
The modern business environment offers us multiple opportunities in embracing technological innovation, taking advantage of newly tested and successful products.
Our principles
Always act in the best interest of clients.
We love to repeat the phrase once said by Harry Gordon Selfridge, founder of the famous London Selfridges Store in 1909; “The customer is always right!” We will act in the best interest of our clients under all circumstances.
Deliver value in order to make a difference
We would be disappointed if we could not bring positive change. We will always do our best and our mission is helping our businesses in fulfilling their potential and becoming leaders in their field.
Keep up good work to enable excellence
We realise we must work hard to bring our customers the best of what is available on the market. Every consultant who has joined our family is committed to constant improvement and innovation in order to deliver the best service to our clients.
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