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HMRC internal manual

Guidance on the Audit of Customs Values

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HM Revenue & Customs
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Exclusions from the customs value: settlement discounts

Cash or settlement discounts are normally granted for prompt payment within a specified period of time. In some cases a discount may be granted for payment made before dispatch of the goods. Such discounts are normally shown on the invoice accompanying the goods and produced with the entry for free circulation.

Time of entry for free circulation

For cash or settlement discounts shown on invoices the following applies:

  • The discount is accepted at the level declared if the payment reflecting this discount has been made at the time of entry to free circulation.
  • If the payment has not been made at the time of entry to free circulation, an invoiced early payment discount which is valid at that moment can be accepted at the level declared provided it is a discount generally accepted within the trade sector concerned.
  • If payment has been made at the undiscounted amount, the full price will form the basis of the customs value.
  • If several possibilities of early payments are granted according to the terms of payment (eg, 5% for immediate payment, 3% for payment within 14 days, 2% for payment within one month), the maximum discount may be accepted at the time of entry to free circulation.
  • A discount for early payment which is higher than is generally accepted within the trade sector concerned should only be accepted if the buyer can demonstrate, where required, that the goods are actually sold at the price declared as the price actually paid or payable and the discount is still available at the time of entry to free circulation.

Post importation verifications

A check is to be made that the price paid equates to the price declared for customs valuation purposes. Where it is established that the importer never takes advantage of a cash discount and always pays the gross contract price for the goods, the discount may be liable for inclusion in the customs value at the time of entry to free circulation.

Details of the case should be reported to the Valuation Unit of Expertise with reference to Tribunal case Koyo (UK) Ltd - LON/03/7017.