Avoid a bashing by the taxman

HM Customs & Revenue (HMRC) is gearing up for a major audit to ensure that businesses are complying with import and export procedures with a special focus on collecting unpaid VAT. Their brief is to fine companies which consistently fail to meet correct standards – and these can be hefty, often thousands of pounds.

But the good news is that if you’ve overpaid duty, this money is likely to be refunded.

These unpleasant outcomes can be avoided if you follow the right procedures. Although directors are ultimately responsible to MMRC, everyone in your company from the top down needs to understand what’s required.

It’s easy to be complacent and imagine that your freight forwarder or clearing agent will always get the paperwork right and submit correct declarations. But this isn’t always the case.

“Often the forwarder is working in the dark because the trader has not given full information,” explains Chamber International associate Mike Strawson. “Often the import/export will have been done by a courier, and they will not have the correct information.

“Also, dare I say, the agent/courier doesn’t always follow instructions, and sometimes doesn’t even know what to do. Remember, the forwarder is only the agent. The principal is responsible for their actions.”

To further complicate matters HMRC is also checking that the right tariff code and Customs Procedure Code (CPC) are used and the correct value declared. The CPC depends on the type of export and there are more than 400 categories. It could be goods manufactured in the UK, goods exported under IPR Suspension, temporary export of the export of goods returned for repair. Get it wrong and you’re likely to have problems.

“Unfortunately, HMRC don’t make it easy for us to find CPCs,” adds Mike. “Whilst the gov.uk website gives help and lists tariff and commodity codes, it’s silent on simple explanations of what CPCs are. The only places we’ve been able to find them are in the printed or CD versions of The Tariff itself, or online as a 309 page PDF document.

“Yet very few traders subscribe to The Tariff, so we’re reliant upon the agent to get it right. So you can see how important it is that they’re given the correct information from the start to enable them to stand a chance.”

One useful source of help we have found is: www.courier-gold.co.uk which gives a list of codes and good basic explanations, so that you can check any code used by your forwarder or courier.

HMRC is also cracking down on tariff codes and CPCs for imports and checking the right value has been declared and the right duty and VAT paid. This is based on the CIF/CIP landed value of the import. If you’re insuring your imports make sure the correct value been declared.

Freight forwarders and clearing agents have a duty of care to those they work for but it means importers and exporters providing them with all the necessary information. The first thing that can be done is for the forwarder to provide to the exporter a copy of the Permission to Progress (P2P) (sometimes referred to as the C88 or SAD form) from CHIEF, the HMRC computer. This should be sent to the exporter as soon as it’s received by the agent. The exporter should then check it. And if there’s anything they don’t understand, query it with the agent.

Exporters and importers should subscribe to HMRC’s Management Support System (MSS) to enable them to check all entries in their names, including those made by couriers. If there’s anything you don’t understand, discuss it with the agent and if necessary with HMRC.

MSS provides a monthly print out from CHIEF showing every entry made in the subscriber’s name by agents and couriers. It gives you a very good opportunity to check for any mistakes and get them corrected promptly, and identify entries which aren’t yours.

At Chamber International we’re considering running a half day training later in the year on “How to Survive a Customs Audit” where we will show the admin procedures to put in place and provide a number of tips to make life easier and keep on the right side of HMRC. Hopefully this will help avoid unexpected bills for unpaid duty, VAT and fines. Please let us know if such a course would be of interest to you. It could save you an awful lot of hassle.

View our 'How to...' guide on surviving a customs audit here