20 November 2023

Traders that import products into the UK need to consider and account for import VAT. 

To facilitate traders and to avoid unnecessary cash flow costs, HMRC introduced the Postponed VAT Accounting System, also referred to as PVA, which is available to all traders. With PVA, import VAT is not payable upon the importation of the products, but it can be accounted for in the VAT return. 

Although PVA is available for all traders and commonly used, some clearing agents and traders continue paying the import VAT upon importation, leading to unnecessary costs for the traders. In either event, the importer needs to report the import VAT details in its VAT return and consider recovery of the import VAT and input VAT.

How do you prove that you’ve paid import VAT?

The trader needs to hold evidence of the VAT that is paid on imported goods before the import VAT can be recovered as input VAT. It has been HMRC’s policy that the (only) evidence of payment of the import VAT can be a copy of the PVA statement and / or a copy of the C79 certificate, the latter in the event that PVA is not applied. 

Customs Declaration Service (CDS) data 

HMRC holds records of actual data entered on customs declarations, which includes data for the calculation of the customs duties as well as the import VAT. HMRC uses the CDS data to perform audits of the correctness of the customs declaration and respective duty calculation.  

HMRC provides the CDS data to traders as a service, allowing traders to hold the same data as HMRC in relation to the customs declarations and key details for the customs duty calculation and import VAT values. HMRC encourages traders to obtain such CDS data to improve the accuracy of their records. https://www.gov.uk/guidance/request-customs-declaration-service-data-on-imports

Discrepancy 

We noticed a discrepancy of the import VAT position between the C79 certificates that HMRC issues and the CDS data that is available.

It appears that the C79 certificates reflect the import VAT details upon initial acceptance of the customs declaration, whilst the CDS data reflect the import VAT details upon arrival and clearance into the UK. This leads to confusion as to what the appropriate source is for completing the import VAT details in the VAT returns and could also lead to discussions with HMRC during a VAT audit.

Whilst the import VAT is payable (and thus recoverable) upon arrival and clearance into the UK, the C79 certificates appear to reflect the import VAT position at the moment of the initial acceptance of a customs declaration. Where customs declarations are pre-lodged (e.g. consignments arrive in Dover via the Eurotunnel), it is possible that the initial acceptance of a customs declaration lies days or even weeks before the arrival and clearance of the shipment into the UK. It is even possible that a declaration is cancelled afterwards or that a shipment never arrives in the UK. The import VAT position on the C79 certificates therefore appears to be incorrect. 

Current position and next steps 

A UK VAT return should reflect the actual and correct position for VAT and the recovery of import VAT. Traders are penalised for submitting incorrect VAT returns. 

Import VAT is payable (and thus recoverable) upon arrival and clearance into the UK. It should therefore be reported in the VAT return that covers the date of the arrival and clearance of the goods into the UK. The C79 certificates that are currently issued appear to reflect the date of initial acceptance of a customs declaration, resulting in incorrect dates of import VAT where customs declarations are pre-lodged. 

It is HMRC’s responsibility to ensure that documentation is issued as evidence for the VAT that is paid on imported goods. However, it must be acknowledged that the C79 certificates and creation thereof from customs declaration data dates back to a period before the possibility of pre-lodged customs. Nevertheless, HMRC cannot hold traders responsible for recovering import VAT in an incorrect period resulting in the above mentioned discrepancy in the available data that is made available by HMRC.

Traders should be able to rely on the C79 certificates as issued by HMRC. However, we view that – where available – traders should be allowed to use CDS data which reflects the actual data entered on customs declarations instead. In particular as the details that are reflected on the C79 certificates appear to be incorrect for customs declarations that are pre-lodged. 

We trust that HMRC will address the identified issue in the C79 certificates and resolve the matter to ensure that the C79 certificates will reflect the import VAT details correctly (i.e. as per the moment of the arrival and clearance into the UK). In the meantime, we hope that HMRC will acknowledge the mentioned discrepancy in the data for the import VAT position that is available from HMRC and address this internally and externally. 

Customs and Trade Consultancy Limited aims to improve the customs and VAT standard for traders, and welcomes a dialogue with HMRC on this topic. 

What you can do

Traders should be aware of and understand the transactions that are recorded in their UK VAT returns, which include the import VAT position. In this respect, we concur with HMRC’s position that CDS data can improve the quality of the records for customs and import VAT, and we encourage the use of HMRC’s CDS data service. 

Customs and Trade Consultancy can support you in obtaining HMRC CDS data, interpreting the data to improve the quality of the customs and import VAT records, and learning how to effectively utilise the CDS data to further improve the customs and VAT compliance. 

If you have any questions about evidence for import VAT, your UK VAT return or utilising CDS data, please get in touch with us today. 

14 November 2023

On 29 August 2023, the UK government published the final version of the post-Brexit Border Target Operating Model (BTOM), which sets out the government’s model for importing goods into the UK from countries inside and outside the EU.      

Risk categorisation under the BTOM    

The BTOM categorises live animals, germinal products, products of animal origin and animal by-products in high-risk, medium-risk, or low-risk categories. Each category will have a proportionate level of control at the UK borders. For example, low-risk goods require provision of a pre-notification and commercial documentation, but medium- and high-risk goods require an additional health certification and may be selected for routine physical border checks respectively.

When did this change take effect?

Risk categories for imports of live animals, germinal and animal products from non-EU countries were published in August 2023.

The UK government has now updated the risk categorisation of EU animal products under the BTOM. The existing risk categorisation has been expanded to include additional commodity codes, and errors pertaining to fish oil and apiculture products as animal by-products have been corrected.

The risk categorisation is available in a table format which also includes a look-up tool (see link) designed to find a risk category by CN code. This would help traders to find the BTOM risk category for their goods. 

Caveats of the BTOM

Trades need to be aware that a commodity from one country could be in the low-risk category but the same commodity from a different country could be in the medium-risk category. Furthermore, the guidance does not include all import requirements for all Sanitary Phyto-Sanitary commodity codes. 

Ultimately, traders remain responsible for categorising their goods correctly into low-, medium- or high-risk goods and identify which (additional) requirements apply for their entry into the UK. They need to educate themselves of any import-related requirements and restrictions when importing their goods into the UK. 

Make sure your business is prepared for BTOM requirements and other post-Brexit changes

If you think your business might be impacted by the Border Target Operating Model or other post-Brexit developments, get in touch with us today. 

We can also help you with other customs and international trade-related matters, as well as operational support with the lodging of UK import and export declarations.

13 September 2023

On 29 August 2023, the UK government published the final version of the post-Brexit Border Target Operating Model, which sets out the government’s model for importing goods into the UK from countries inside and outside the EU.      

What is the Border Target Operating Model?    

This applies to imports of live animals, germinal products, animal products, plants and plant products from all countries into Great Britain, and describes the implementation of new security and biosecurity controls on imports from the EU.

The main limitation of the Border Target Operating Model

Unfortunately, it does not provide any detail with regard to the requirements for the entry and importation of organic products into the UK.

What are the current rules for importing organic goods?    

Currently, organic products that the UK exports to the EU must be accompanied by a so-called Certificate of Inspection (COI), a document certifying that shipped goods have been inspected and that they conform with the terms stated on the sales contract. In contrast, organic products that are imported from the EU, European Economic Area (EEA) and Switzerland into the UK do not yet require such a COI.

The deadline for COIs has been pushed back to 2025

According to the newly published Border Target Operating Model, imports of organic products into GB from the EU, EEA and Switzerland would have required COIs from 31 December 2023.

However, DEFRA announced on 1 September 2023 that this timeline is incorrect and that the requirement for COIs for organic products from the EU, EEA and Switzerland has, again, been delayed until 1 February 2025.

Why has the deadline for COIs been delayed?

The grace period until 1 February 2025 allows businesses to continue importing and trading organic products coming from the EU, EEA and Switzerland without requiring a COI. Products must still adhere to Sanitary and Phytosanitary (SPS) requirements and other rules under the post-Brexit EU-UK Trade and Cooperation Agreement.

It’s important to note that imports into GB from all other countries already require a GB paper-based COI. The COI template has recently been updated and has been required for all imports into the UK (except from the EU, EEA and Switzerland) since 1 September 2023.

Make sure your business is prepared for COI requirements and other post-Brexit changes

If you think your business might be impacted by the Border Target Operating Model or other post-Brexit developments, get in touch with us today.

We can also help you with other customs and international trade related matters, as well as operational support with the lodging of UK import and export declarations.

5 April 2023

The UK government has published the draft version of the Border Target Operating Model, which sets out the government’s model for importing goods into the UK from countries inside and outside the EU. 

What does the Border Target Operating Model cover?

The Target Operating Model applies to imports of live animals, germinal products, animal products, plants and plant products from all countries into Great Britain, and describes the implementation of new security and biosecurity controls on imports from the EU.

How will the Target Operating Model be implemented?

The model will be implemented through three milestones, and the government is urging importers and their supply chains to start their preparations for the first milestone now.  

Key dates for your diary:

• 31 October 2023 – The introduction of health certification on imports of medium risk animal products, plants, plant products and high-risk food (and feed) of non-animal origin from the EU. 
• 31 January 2024 – The introduction of documentary and risk-based identity and physical checks on medium-risk animal products, plants, plant products and high-risk food (and feed) of non-animal origin from the EU. At this point, imports of Sanitary and Phytosanitary goods from the rest of the world will begin to benefit from the new risk-based model.  
• 31 October 2024 – Safety and Security declarations for EU imports will come into force. Alongside this, we will introduce a reduced dataset for imports and use of the UK Single Trade Window will remove duplication where possible across different pre-arrival datasets. 

These milestones apply to medium – to high-risk animal products, plants, plant products and high-risk food (and feed) of non-animal origin (sanitary and phytosanitary goods). 

Will other products be impacted too?

It is important to consider the import requirements for low-risk sanitary and phytosanitary goods as well. These products include a wide range of fresh produce which don’t carry an identified pest/disease risk but where there isn’t sufficient evidence to confirm there is no risk. This also includes processed, shelf-stable products, such as composites, certain canned meat products, processed animal by-products, certain fishery products, and aquatic animal products from lower risk countries. 

The Border Target Operating Model outlines that the importation of low-risk consignments will have minimal routine border controls applied. Provision of a pre-notification and commercial documentation will still be required, but there would be no requirement for health certification or routine physical border checks. 

Low-risk consignments can only enter ports designated for their commodities

Irrespective of minimal routine border controls for these low-risk consignments, these goods would still need to enter via a port that has a Border Control Post (BCP) designated for that type of commodity. This requirement has been set because the BCP links to a port health authority to administer the pre-notification. If local evidence suggests that a physical inspection of a low-risk consignment is necessary, a Border Control Post is the most suitable location for this to occur. 

The requirement for goods to be routed via a port that has a BCP for the designated commodity could pose an issue for traders that import low-risk sanitary and phytosanitary goods via a port that has limited controls capability, such as the Port of Dover. 

How might Dover be impacted by the Border Target Operating Model?

As Dover is Europe’s busiest roll-on roll-off ferry port in the UK, and together with the Eurotunnel has the quickest route to and from Europe, Dover is a vital international gateway for the movement of trade. However, due to its limited border control capability, there is a serious risk of disruption to existing trade routes via the Port of Dover and the Eurotunnel for consignments containing sanitary and phytosanitary products. 

Make sure your business is prepared for these changes

Traders will need to consider this restriction of importing consignments containing sanitary and phytosanitary products via the Port of Dover and the Eurotunnel, and review alternative options if they do not want to run the risk of disruption. 

The draft Border Target Operating Model seeks feedback from stakeholders on all aspects of the Border Target Operating Model. We encourage traders to flag the risks associated with low-risk consignments whilst the Border Target Operating Model is still in draft to create awareness at the government level.

Useful links

The publication can be accessed: The Border Target Operating Model: Draft for Feedback

A press release containing additional background can be accessed at: UK Government publishes draft proposals for new border controls – GOV.UK (www.gov.uk)

Contacts

To find out more about how the Border Target Operating Model could impact your business, please contact us directly.

Arjen Odems, odems@cutraco.com

Maartje Meijer, meijer@cutraco.com

Since the UK left the EU in 2021, new customs policies have been reviewed to support business and facilitate new trade agreements.

Currently, the UK has advance rulings for tariff classifications and origin of goods, but not for customs valuations. This can make it harder for traders to determine which customs valuation methodology is the most appropriate to establish the customs value for the calculation of the customs duties.

To address this problem and for traders to obtain confirmation on the customs value method to use, the UK Government aims to introduce the option to obtain an Advance Valuation Ruling (AVR).

In their policy paper, HMRC outlines the details and background relating to the AVR. The main aim being a written decision that is legally binding on the trader as well as on HMRC. Therefore, an AVR provides certainty to traders on how to determine the customs value, which serves as the basis to calculate the customs duties that are due.

The UK Government hopes that the AVR system will also contribute to their objective to deliver a modern digital customs service for traders in the UK, which in turn:

• Enables the UK to meet the requirements of the new Free Trade Agreements (FTAs), and 
• Support the UK’s accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

HMRC hopes that by introducing a legally binding valuation ruling, traders should find it easier to apply a certain customs value for their imports as well as to justify the appropriateness of the customs value to the customs clearing agents.

For further guidance and advice on how your business can prepare for these changes, please contact us directly:

Contacts

Arjen Odems, odems@cutraco.com

Maartje Meijer, meijer@cutraco.com

If you’ve been following UK politics and Brexit news in the last few weeks, you might be familiar with the phrase ‘Windsor Framework’, which has been in the headlines rather a lot. In particular, since UK MPs passed the bill by 515 to 29 votes on Wednesday, March 22nd.

To spare you endless jargonese, we’ve produced an 850-word summary of it in layman’s terms.

We’ll explain what the Windsor Framework is, why it’s important, and who might benefit from it.

To begin: what is the Windsor Framework?

This is a legal agreement that was revealed by the UK Government on February 27th, 2023. It is chiefly designed to alleviate the disruption caused by the post-Brexit Northern Ireland Protocol, which critics argue has undermined trade between Northern Ireland and Great Britain since it took effect on January 1st, 2021.

Why is the Windsor Framework such an important milestone for Brexit?

• It should prevent a hard border between Northern Ireland and the Republic of Ireland

Although a hard border was already averted under the Northern Ireland Protocol, businesses faced higher costs and more bureaucracy due to ‘burdensome customs processes, inflexible regulation, tax and spend discrepancies and democratic governance issues.’ The Windsor Framework is thus regarded as a long-term solution that eliminates the possibility of a hard border on the island of Ireland.

• Facilitate faster movement of goods between Northern Ireland and Great Britain

The Windsor Framework is expected to substantially reduce the number of checks and controls on the movement of goods between Great Britain and Northern Ireland. This will be welcome news to businesses that have endured disruption since Brexit took effect.

Who may benefit the most from the Windsor Framework?

• Trusted traders will benefit from significantly lower customs declaration costs

The Windsor Framework permanently enables the free movement of goods between Great Britain and Northern Ireland, removing any sense of a border in the Irish Sea. It also expands the ‘green lane’ (the UK’s internal market scheme) to cut out time-consuming, costly customs processes and checks for businesses recognised as ‘trusted traders’.

UK businesses selling goods destined for Northern Ireland can become ‘trusted traders’ by proving to HMRC that their goods are not at risk of being moved to the EU and becoming subject to EU duty. These businesses must also meet all the necessary customs compliance requirements, and others, such as systems and controls, which you can learn more about on the UK.gov website here.

For companies involved in manufacturing and processing, the turnover threshold for moving goods that will stay in Northern Ireland has quadrupled from £0.5 million to £2 million. Thus, this expands eligibility to about four fifths of manufacturing and processing companies in Northern Ireland that trade with Great Britain. But firms above this threshold will still be eligible to move goods if they are to be used for animal feed, healthcare, construction or not-for-profit sectors.

• Researchers and scientists could have access to the Horizon Europe Programme

This is a 95-billion-Euro funding programme for research and innovation in Europe, afforded to countries in the EU and associated countries, the latter of which would apply to the UK. Funding is open to all organisations interested in engaging in ground-breaking research, new technology, or other projects to support climate change mitigation and improve food security.

• The agreement could decrease the likelihood of a trade war between the UK and the EU

If the UK refused to agree a Brexit deal, the EU could retaliate by suspending the Trade and Cooperation Agreement. As you can imagine, this would be very disruptive for UK businesses, especially those that trade heavily with EU member states. Fortunately, the Windsor Framework renders this outcome highly unlikely.

• The UK’s financial services sector could benefit from a new UK-EU Financial Regulatory Forum

The executive body of the EU revealed earlier this month its intention to finalise a Memorandum of Understanding (MoU) on financial services regulatory cooperation. Since Brexit, London has faced stiffer competition from EU financial hubs such as Amsterdam, Europe’s top share-trading venue in 2022, and Frankfurt, continental Europe’s leading financial centre in 2021. It is hoped the new forum could repair and potentially strengthen UK-EU relations in the financial sector, which in 2021 contributed roughly £174 billion to the UK economy – more than 8% of national economic output.

• VAT could become more flexible for UK businesses

UK businesses will be allowed to charge reduced VAT rates on goods supplied and installed via immovable property. The UK will also be free to reduce VAT rates for a broader range of goods than is currently permitted under EU law. For example, the UK Government claims the Windsor Framework would save 2,000 Northern Ireland businesses from having to register for VAT under a 2025 EU Directive.

• There could be a new UK-specific marketing authorisation and labelling system for medicines

The UK’s Medicines and Healthcare Products Regulatory Agency (MHRA) could assess all medicinal products destined for the UK. Those that comply with UK laws could be labeled ‘UK only’ and could be moved freely between Great Britain and Northern Ireland. The UK Government also claims the Windsor Framework ‘safeguards frictionless access to the EU market for world-leading Northern Ireland pharmaceutical and medical technology firms’.

• Agricultural foods, such as pork and milk, will have reduced checks.

This could benefit supermarkets and other food retailers, whose products will no longer be subject to physical checks and tests. Visual inspections should be drastically cut from 100% to 5%.

When is the Windsor Framework expected to be implemented?

Parts of the agreement could take effect by May 2023, but it may not be fully operational until 2025.

It is also highly likely that there will be further negotiations and amendments to the Windsor Framework in the coming months and years.

How can you stay up to date with all things Brexit?

Follow us on LinkedIn to read more expert analyses on Windsor Framework and other Brexit news.

Or get in touch with Arjen or Maartje, who will be happy to assist you.

Contacts

Arjen Odems, odems@cutraco.com

Maartje Meijer, meijer@cutraco.com

Whilst 2023 is already well underway, it is important to consider the important milestones relating pending UK import and export measures that 2023 holds.

These milestones should be considered and addressed appropriately to avoid disruption of trade flows in and out of the UK. CDS export Exporters will have more time to move across to the new Customs Declaration Service (CDS).

The planned date of the 1st April 2023 no longer applies and traders now have until 30th November 2023 to continue using the CHIEF system for export declarations. CDS for exports will be introduced in a phased approach and the key phases are: › From late February 2023 – export declarants that only move goods through ports in the UK that use the Goods Vehicle Movement Service (GVMS) – also known as non-inventory linked ports.

› From May 2023 – export declarants that currently use the National Export System (NES) web service to submit export declarations on CHIEF

› From September 2023 – export declarants using inventory-linked ports and DEPs

› From 30 November 2023 – All export declarations must be made using CDS Import controls The Government previously announced that the changes to import controls on certain products coming from the EU would not be introduced on 1 July 2022 as planned. These import controls now have a target launch date of end of 2023.

The list of controls that are now planned to be introduced by the end of 2023 is:

› A requirement for safety and security declarations on EU imports

› A requirement for health certification for further Sanitary and Phytosanitary (SPS) imports

› A requirement for SPS goods to be presented at a Border Control Post (BCP)

› A requirement for SPS currently at destination to be moved to a BCP

› A requirement to issue Certificates of Inspection (COI) for organic imports

› A requirement for organic imports to be presented at a BCP

› Prohibitions and restrictions on the import of chilled meats from the EU

UKCA marking

The UKCA marking is the product marking used for products being placed on the market in Great Britain. The UKCA marking applies to most products for which the European CE marking could be used and would have become required per 1 January 2023.

To provide businesses with some flexibility, the UK government will bring forward legislation that continues to allow recognition of the CE marking for most goods that are being placed on the market until 31 December 2024.

It should be noted that UKCA marking is already available and can be used.

Conclusion

Importers of products from the EU currently benefit from the relative flexible UK import controls measures, at least until the above listed restrictions come into play. It is however pertinent that the UK and EU come to some sort of mutual recognition on the import controls topics to ensure a continuation of the market access for all goods.

With the agreement on 27 February 2023 relating the Northern Ireland situation (The Windsor Framework), the EU and the UK have made a first step to a closer relationship.

The expectation is that this also opens up the opportunity for further cooperation on some of the above mentioned topics, including the import controls. Nevertheless, the expectation is that some of these topics will not be resolved before the provided timeframes and further disruptions and increase in cost for doing business in the UK are still expected.

Contacts

For any questions, please feel free to contact:

Arjen Odems, odems@cutraco.com

Maartje Meijer, meijer@cutraco.com

Dutch Customs is replacing the existing customs declaration services (AGS) with a new system called DMS. This is due to new legislation and regulations from the EU and is based on the EU Customs Data Model for digital customs declarations.

The initial plan was that DMS would be available for operators in the Netherlands in the course of 2022, but due to a number of issues this has been postponed. AGS will be phased in and for import and export declarations will remain available until 30 November 2023, whilst AGS for special procedures will remain available until 31 December 2023.

We note that NCTS will continue to exist alongside DMS. Declarations for the transit procedure can only be made in NCTS.

Key changes in DMS:

The data set in the customs software solution needs to be updated and communication protocol needs to meet the new standards. This also means that traders need to provide additional details in order for the customs declarations to be lodged and accepted.

Historically, Dutch Customs was able to make changes/edits in the customs declaration in the event of findings resulting audits of the declarations (e.g. for random checks upon entry). With DMS, this is no longer possible and the clearing agent and/or the trader will receive a ‘message’ reflecting the findings. 

The clearing agent and/or the trader are subsequently responsible to make these amendments in the lodged declarations or appeal the findings. 

This could potentially lead to delays in releasing the shipments.

The common practice in the Netherlands for simplified declaration procedures, entry into the declarants records, and filings for customs warehousing, inward processing relief, etc. (commonly referred to as the GPA and SPA) will disappear and will be replaced by filings into DMS. 

This means that companies currently using the GPA and / or SPA will need to ensure that the relevant data elements are lodged via DMS on a complete and timely manner.

Planning and timelines

DMS will be introduced in a phased approach. The intention is that the first couple of clearing agents will transfer to DMS on a pilot basis in the first and second quarter of 2023. Subsequently, companies that are filing customs declarations will receive notification from Dutch Customs regarding the transfer onto DMS, including suggested timelines.

The current end-date for transfer from AGS to DMS is set at 30 November 2023 for normal declarations and 31 December 2023 for current GPA and SPA filings. This indicates that Dutch Customs will no longer accept customs declarations via AGS after the mentioned dates.

Conclusion

Dutch customs encourages customs clearing agents and traders that lodge declarations themselves to work more real-time. Robust customs processes are therefore becoming even more important and the importance of IT support becomes increasing significantly.

If businesses want to smoothly start lodging declarations via DMS, it is pertinent that they actively and timely engage with the DMS migration process and organise their IT structure to ensure they are prepared to lodge declarations on a daily basis, or provide the information to their declarant who will lodge the declarations on their behalf.

Contacts

For any questions, please feel free to contact:

Arjen Odems, odems@cutraco.com

Maartje Meijer, meijer@cutraco.com