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HMRC internal manual

Guidance on the Audit of Customs Values

Method 4: trading accounts

The deductions for profit and general expenses should be derived from the trader’s accounts. By the exclusion of unusual, abnormal or non-recurring expenses, the balance remaining should reflect a consistent figure. Where possible and practical, more than one year’s accounts should be considered to arrive at an average.

Trading accounts are only of use if they reflect the overall financial situation relating to the imported goods. If the trader deals with different goods (for example Method 1 importations or EU produced), then consideration should be given as to whether Method 4 is workable. Each case will depend on the way in which the accounts are organised. Figures which do not accurately reflect the situation for the imported goods should not be used.

Deductions for profit should be the net profit before tax. The amount to be allowed is that actually achieved unless it is substantially higher than the usual for the particular trade and commercial level. In such cases, the allowance for profit should be limited to a reasonable amount for the importer’s post-importation pre-sale activities only.

In cases where the importer makes little or no profit (for example where a business is being established), then no allowance should be made for notional profit which does not exist.

GACV39100 provides an example of how to arrive at the ‘usual profit and general expenses’ from the importer’s accounts.