30. Customs and customs duties
Your responsibilities as an insolvency practitioner when the company is involved in importing and exporting goods.
Unless otherwise stated, references to ‘customs’ or ‘customs duties’ means all the following duties:
- Customs Duty
- import VAT
- anti-dumping duty
- countervailing duty
- additional duties such as duties relating to international sanctions
The taxable point for customs duties is when goods have been accepted into free circulation.
Where goods are held in a customs warehouse or a special customs procedure which suspends duty, the taxable point is when the goods are released or there is a breach of that procedure.
If the goods are re-exported while in a special procedure without being released into the UK, no taxable point is created in the UK and no tax is due.
If duties were suspended before insolvency and become payable after insolvency (for example, goods entered a customs warehouse pre-insolvency and leave it post-insolvency into free circulation), those duties are treated as post-administration debts.
When you are appointed to a business involved in international trade, you become responsible for making sure the company remains compliant with:
- any customs obligations
- the conditions and obligations associated with the use of any customs authorisations and approvals held
You must:
- check if the business holds any customs authorisations
- review the goods currently held under customs authorisations and check customs duties have been paid and accounted for correctly
- find out if any goods have been imported using postponed VAT accounting for import VAT and check this has been done correctly
- tell the supervising office (stated on the authorisation) that the business is insolvent
- make sure that any goods held under a customs authorisation or special procedure are correctly disposed of according to the authorisation or special procedure
- read about the Customs Declaration Service if you intend to import and export goods after your appointment — you can also use a third party to make customs declarations on your behalf through customs representation
The incorrect discharge or handling of goods can result in a customs debt. If the taxable point of the debt is post-insolvency, the debt will be payable as an expense by the administrator or liquidator.
You need to carry out a full stocktake of:
- what goods have been imported
- what goods are due to be exported
- where these goods are located
- what customs duties have been paid or are expected to be paid on the goods
You should also check what due diligence has been carried out by the company into its supply chains.
If you’ll be making customs declarations on behalf of the insolvent business, you should read more information about due diligence when making customs declarations.
When you are appointed to a business with customs duties obligations, you need to:
- identify and record any outstanding customs duties
- retain and maintain accurate customs duties records for at least 4 years
Goods under customs control will become liable for customs duties when released to free circulation. You need to make sure records are kept to demonstrate that the conditions of the authorised procedure have been complied with and that liabilities were determined correctly.
Making inaccurate declarations may result in underpaid duties, delays at the border and potential penalties.
30.4.1 If you use a third-party representative to act on your behalf
Liability for customs duty may be split between you and the third-party representative depending on whether they provide:
- direct representation
- indirect representation
You can read more information about the 2 types of representation and what they mean for you.
30.4.2 Accounting for Customs Duty
Customs Duty may be charged on goods imported into the UK from outside the UK (or from outside both the UK and the EU if imported into Northern Ireland).
For most goods, Customs Duty applies only when the value of the goods exceeds £135. The rate of duty depends on the type of goods and their country of origin.
Customs Duty may apply to excise goods, such as alcohol and tobacco, regardless of the value of the goods.
When you are appointed, you will need to:
- make sure any goods that are being imported have the correct commodity codes
- check that any goods already imported but not released have the correct commodity codes
- check the correct amount of duty and taxes has been applied to the goods
You can read more information about how goods are classified.
30.4.3 Import VAT
When you are appointed, you are responsible for:
- making sure that the correct amount of import VAT is paid and properly accounted for
- where postponed VAT accounting (PVA) is used, confirming the conditions for using PVA are met
- where import VAT is suspended, making sure the liability is correctly discharged or the VAT is paid when required
- where relief from import VAT is claimed, making sure the conditions for the relief are met
If a business is unable to use postponed VAT accounting (PVA), because for example, they are not VAT registered, import VAT must be paid at the time of importation.
30.4.4 Anti-dumping duty and countervailing duty
When you are appointed, you are responsible for making sure that the company pay any anti-dumping or countervailing duty that apply to the goods.
Find out:
30.4.5 If a UK business does not pay the correct customs duties
If the company underpays customs duties, HMRC will send a C18 demand (also known as a post-clearance demand note) to recover any further duties that are due after an import declaration has been cleared.
A customs duty deferment account allows a company to delay paying customs duties, excise duty and excise duty VAT when importing goods. Instead of paying duties for each consignment, you can make a single monthly payment.
When you are appointed, you will need to contact HMRC to discuss any outstanding payments and make a new payment arrangement. This is because the original Direct Debit arrangement is stopped.
You can contact the duty deferment team by email: cdoenquiries@hmrc.gov.uk.
A Fulfilment House (FH) is a third-party company which provides storage for imported goods and manages their distribution on behalf of sellers outside of the UK. They ensure that all goods are properly declared and comply with customs regulations, including paying any applicable duties and taxes.
The Fulfilment House must notify HMRC when they cease trading. If they do not, they are liable to a penalty under the Fulfilment House Due Diligence Scheme (FHDDS).
When you are appointed, you are responsible for monitoring the supply chains under the Fulfilment House Due Diligence Scheme (FHDDS). You will need to keep accurate records and do due diligence checks.
You can find out more information about what checks you need to and what records you need to keep.
30.6.1 Establish who owns the goods
Goods stored in Fulfilment House are often owned by overseas entities who use the Fulfiment House to store the goods before they are sold in the UK.
When you are appointed, you need to establish who owns the goods at the time of insolvency. You’ll need proof of ownership, which may include:
- sales invoices
- shipping documents
- documents that establish a clear chain of ownership of the stored goods
If the overseas seller, not the Fulfilment House, owns the goods at the time of insolvency, the seller will usually retain ownership. If there are unpaid fees between the seller and the Fulfilment House, or a lein on the goods, the Fulfilment House could seize the goods to cover its debts.
30.6.2 If the company is rescued from insolvency or sold as a going concern
The new buyer may take over operations. The goods can then remain stored in the Fulfilment House and processed normally.
30.6.3 If the company enters a formal insolvency process
The goods may be returned to the owner (or seller), as long as there are no outstanding fees or charges owed to the Fulfilment House.
You can read information on the civil penalties for contraventions of customs law to find out:
- what penalties may be charged
- how much may be charged
You can also find out more information about civil evasion penalties for customs, excise and VAT.
HMRC has a dedicated account manager specifically for insolvency related customs queries to help you when taking over businesses which import or export goods.
The account manager will:
- resolve current issues and manage them through to completion
- give customs advice for complex processes and authorisations
- provide an escalation route for unexpected issues and customs related complaints
- call you to communicate updates and discuss any issues
- provide advice in advance of any future changes
if you have a query, you should email: customsclientsupport@hmrc.gov.uk and put ‘Insolvency’ in the subject title.