Guarantee requirement
Information on how to set up and types of guarantees.
Without using a customs facilitation, customs duty is paid at the time of import. When duty is not paid at the time of import, there is a risk that duty will not be correctly paid, so HMRC may require the person who wishes to suspend customs duty to provide a guarantee, to ensure the debt to HMRC can be paid.
For infrequent use of special procedures (3 times a year or less) a single guarantee, also referred to as an individual guarantee, covering that specific goods movement may be used. Single guarantee is the term used in UK legislation, this operates alongside the use of authorisation by declaration.
If an applicant needs to suspend or defer duty on a regular basis, they will need a customs comprehensive guarantee (CCG) which can cover multiple declarations over an extended period of time. If an applicant needs to suspend or defer duty on a regular basis (more than 3 times a year), they may need a CCG authorisation which can cover multiple declarations over an extended period of time. A CCG authorisation is required for operations in Northern Ireland. An applicant will be told if they need a CCG authorisation in GB when they apply for the customs special procedure. A CCG authorisation will always be needed for common and union transit.
A guarantee (CCG or single) is provided by a guarantor, which will normally be a bank or other financial institution.
The guarantor must be regulated by the appropriate national banking authority, and there are rules governing where that guarantor must be established:
- guarantor for transit authorisation must be established in the UK and the guarantor must be regulated by prudential regulation authority in the UK
- guarantor for special procedures, duty deferment or other declarations in Great Britain (GB) must be established in the UK and the guarantor must be regulated by prudential regulation authority in the UK
- guarantor for special procedures, duty deferment or other declarations in Northern Ireland, where the guarantor must be established in NI, the guarantor must be regulated by prudential regulation authority in the UK; must be established or have a branch in Northern Ireland
- where the guarantor must be established in the EU, the guarantor must be regulated by the appropriate national banking authority for the country where it is established — lists can be found on the European banking authority website
While the guarantee is a promise from the guarantor to HMRC to cover any shortfall in payment, the arrangement of that guarantee is a matter between the applicant and their chosen financial organisation. All financial organisations are responsible for setting their own terms and conditions, setting their own rate of charges for that service, and deciding whether to offer customs guarantees. HMRC are not involved in these commercial decisions.
Depending on the facilitation the applicant uses, the part of the UK (GB or Northern Ireland) where the applicant wants to defer duty, and their record of financial stability and customs competence, control, and compliance, they may be eligible for a waiver of all or part of the guaranteed amount.
If the applicant has AEO(C) status they will automatically qualify for 100% waiver of their potential debt (transit and special procedures) and actual debt (duty deferment) in GB and 70% of their actual debt (duty deferment) in Northern Ireland.
The applicant’s waiver will reduce the amount required to be covered by the guarantee that they need to obtain from their bank or other financial institution. For example, if the applicant has calculated their reference amount as being £100,000 (the amount of duty being suspended at any one time), but HMRC have granted them a 70% waiver to this amount, they will only need to provide a bank guarantee of £30,000 to HMRC. Waiver levels available are 50%, 70%, and 100% of the reference amount, depending on status.
To suspend or defer duty on a regular basis, the applicant will need a customs comprehensive guarantee (CCG). This is a guarantee which can be used multiple times across different facilitations.
- a CCG will always be required to operate a duty deferment account in Northern Ireland
- a CCG will usually be required to use common or union transit, unless a full waiver is granted
- a CCG will usually be required to support a special procedure authorisation in Northern Ireland, unless a full waiver is granted
- a CCG will not normally be required to operate a duty deferment account in GB, or to support a special procedure authorisation in GB — if one is required the business will be told this when they apply for the duty deferment account or special procedure authorisation
A single guarantee is used when the applicant:
- moves goods no more than 3 times a year under the common transit convention
- puts goods into customs procedures (inward processing or end use) 3 times a year or less
- needs to cover an unusually large amount of customs debt that cannot be covered by their CCG
- needs to cover amounts due under the UK agricultural policy
- needs to cover anti-dumping or countervailing duties or to secure an import quota
A single guarantee can also be used if the value of import duties is disputed or unknown and HMRC advise that a guarantee is required to release the goods.
There are two elements to a CCG: the CCG authorisation and the CCG guarantee. The applicant needs to apply to HMRC for the authorisation and (once that has been approved) apply to a bank or other financial institution for the CCG guarantee.
When an applicant applies for a CCG authorisation, they will need to calculate their guarantee reference amount. The guarantee reference amount is the total amount of tax and duty that they intend to suspend at any one time. They should calculate this by looking at previous goods movements they have carried out and by considering whether, and by how much, their previous trading pattern may change in future. The applicant will need to account for seasonal increases.
For example, an applicant wants a CCG for transit as they regularly move goods from Greece to the UK by road. It takes 5 days for the goods to make the journey, one lorry leaves Greece every working day and each lorry carries goods with duty of £1,000. The basic reference amount would therefore need to be £5,000, 5 lorry loads in transit movements at any one time, each with a guarantee requirement of £1,000.
However, the applicant knows that in July lorries will only leave every other day. They also know that in February and November, two lorries will be leaving every day.
The applicant should not reduce their basic reference amount of £5,000 because of the lower number of lorries in July, because for the rest of the year they will still have five lorries on the road. However, the applicant will need to increase their reference amount to £10,000 to cover the increased transit movement they will be making in February and November (10 lorries x £1,000 = £10,000). Remember, the applicant’s reference amount will need to be sufficient to cover all tax (VAT, corporate taxation, excise duties) and duty that they will be suspending at any time. If the applicant’s transit guarantee is not sufficient, they will not be able to begin any new movements once they have reached their reference amount value.
It is always possible to apply to adjust the reference amount if your business needs change. However, please be aware that HMRC will need to reconsider and approve any increase to the reference amount, and the applicant will also need to arrange a replacement financial guarantee if the reference amount changes.
Once the applicant has been granted their CCG authorisation, they are eligible to use a CCG guarantee to cover their suspended duty. HMRC encourages applicants to begin liaising with their intended guarantor before receiving their CCG authorisation, as it can take some time to set up a guarantee with a financial institution. However, the applicant should not finalise the guarantee details until receiving their CCG authorisation to ensure the guarantee is for the correct amount (reference amount less any waivers granted).
Unlike a CCG, the applicant does not need to be authorised to provide a single guarantee. Where HMRC require a business to provide a guarantee (primarily where the duty value is unknown or disputed), they will be told what guarantee is needed and how much it needs to be.
A single guarantee will need to be for the full amount of tax and duty required by the declaration. Unlike a CCG, there are no waivers available for a single guarantee, even for AEO(C) holders.
A single guarantee can be provided by a one-off deed of guarantee covering a particular declaration. Alternatively, the applicant can apply for a general guarantee account (GGA), backed by a deed of guarantee, which can be used for most of the situations where a single guarantee is required. This allows them to provide repeated individual guarantees from the same GGA.
To set up a general guarantee account (GGA), the applicant will need to request an application pack, which will include the guarantee form to give to their guarantor Details are available on gov.uk by searching for ‘general guarantee’ or directly at get an individual guarantee to cover customs debts (correct March 2024).