Customs Duty receipts up by 50% in the last year
£1.7 billion bonanza could be used to help struggling households but at a price
Figures published by HM Treasury show that income collected from Customs Duty payments, levied on goods imported from around the world into the UK, has risen by 50% in the last 12 months.
Simon Sutcliffe, Customs Duty Partner, said: “Between July 2020 and June 2021 the total raised from tax duty was £3.4 billion, but from July 2021 to June 2022, it increased to £5.1 billion. An increase of £1.7 billion or 50 percent which could be used to help struggling households.
“During the competition for the new Prime Minister, there have been discussions as to how many potential tax cuts would be funded. Many analysts have stated that the new Chancellor would have £30 billion of extra funding, from increased taxation, to rely on to fund tax cuts. What we don’t know is whether the extra Customs Duty revenue is part of an additional pot that tax-cutting leadership contenders are seeking to rely upon.
“There are two reasons for this growth in Customs Duty revenue. Firstly, as Customs Duty is calculated as a percentage of the value of any imported goods, the rising costs of raw materials and finished goods crossing the UK border means that, as prices rise, so does the amount of Customs Duty collected.
“Secondly, post-Brexit, HM Revenue & Customs (HMRC) allowed traders to defer their customs declarations, relying upon them to submit a full declaration many months later. This special scheme allowed UK supply chains to keep moving in a time of transition and uncertainty. Now that this special regime has ended, traders are having to submit their customs declarations and correct errors in the amount of duty they originally declared.
“Although a ‘windfall’ for the UK Treasury means rising prices for manufacturers and consumers, Customs Duty is usually passed straight-on by way of higher prices for raw materials and finished goods to the end user. This extra revenue may be regarded as a potential way to fund a tax cut for the new Government to allow them to influence and incentivise different sectors of the economy. At its base level it represents another rise in prices for companies and consumers and more inflationary pressure.
“Pre-Brexit much of the Customs Duty collected by HMRC would have been sent to the EU Commission as part of our EU membership responsibilities. However, this revenue now stays in the UK and goes directly to the Treasury.”
Would you like to know more?
If you would like further information on this topic including how we can help you prepare for these changes, please contact Simon Sutcliffe using the details on this page or the form below.