Business tax – guidance

VAT and import duty: reducing financial guarantees

Use Simplified Import VAT Accounting to lower the financial guarantees you give for the Duty Deferment Scheme.

The Duty Deferment Scheme and financial guarantees

You have to pay VAT and Import Duty when you import goods to the UK. You can use the Duty Deferment Scheme (DDS) to make monthly payments to HM Revenue and Customs (HMRC) through a Deferment Approval Number (DAN).

To use the DDS you have to give HMRC a guarantee, through your bank, that you can meet the cost of all your VAT and duties.

Simplified Import VAT Accounting (SIVA) can reduce the amount of the guarantee so it only covers duty, not VAT.

Conditions for SIVA approval

If you don’t already have a deferment account you should apply for SIVA first.

To get SIVA approval you must have a high level of control of your operations and flow of goods. You’ll need to demonstrate good record keeping that allows proper customs controls to be followed, and a good history of VAT compliance.

Ideally, you’ll have been registered for VAT for at least 3 years. You can still apply if you haven’t, but you’ll be subject to additional financial and credibility tests.

You can’t use SIVA if you:

  • owe money to HMRC
  • have been charged with a serious offence by HMRC
  • have defaulted on deferment account payments more than once in the last 12 months
  • have incurred any default surcharges in the last 12 months
  • have transferred the business as a going concern in the last 3 years - unless the transfer happened because of a change in legal status, such as becoming a limited company

Your financial status

Your SIVA application will be rejected if your business is in financial difficulties, such as:

  • administration
  • liquidation
  • insolvency
  • receivership

You can apply for SIVA when your business is no longer in financial difficulty as long as you meet the approval conditions.

Additional checks

If you haven’t had a DAN before, HMRC might carry out additional checks. They can ask for:

  • your last 3 years audited accounts
  • a credit check on your business

Apply for SIVA

You need to complete form SIVA1 to apply. HMRC usually send you a decision within 120 days, but will send you an acknowledgement if they can’t. You still need to guarantee to cover both VAT and duties until your SIVA application is approved.

If your business has more than one DAN you’ll need to apply for SIVA separately for each account.

If you don’t get approval you can reapply at any time.

Operating SIVA

You’ll get a letter of approval from HMRC if your application is accepted. You’ll need to complete form SIVA2 to give details of the amount you’ll be deferring each month.

If you don’t send this form to HMRC within 6 months of your approval letter, your SIVA approval will be cancelled and you’ll have to apply again.

Conditions for continued approval

You still need to meet the conditions for SIVA approval to continue using the scheme.

If you fail to meet the conditions at any time, approval can be suspended or withdrawn and you’ll have to immediately provide a guarantee to cover all VAT liabilities. If you don’t HMRC will reduce or suspend your deferment account limit.

SIVA for agents

Any agent can apply for SIVA.

If you’re an ‘indirect’ agent who acts in your own name, you’re jointly liable with your client for any customs debt.

If you’re a ‘direct’ agent who acts in your client’s name you’re not liable for the customs debt. HMRC will treat any payments you make from your DAN as payments on behalf of your client.

You must meet any liabilities that are set against your deferment accounts, or your SIVA approval will be withdrawn.

Duty of care

You need to check who you’re doing business with as SIVA may be desirable to fraudsters. You must make reasonable checks to establish the integrity and reliability of your customers. HMRC can’t tell you exactly what checks you should make.

When thinking about what checks to make you might consider:

  • the nature of the supply - certain goods such as mobile phones are favoured by fraudsters
  • aspects of payment arrangements and conditions
  • details of the movement of goods involved

Contact the Customs Hotline to report any suspicious transactions.