HM Revenue & Customs (HMRC) announced in the recent publication of their Border Operating Model that they are considering removing the requirement for financial guarantees on businesses wanting to use the Customs Special Procedures. These Procedures include Inward and Outward Processing, Temporary Admission and Customs Warehousing etc.
Currently, any business wanting to use such these reliefs, and that suspend or totally relief Customs Duty and Import VAT, have to have a Comprehensive Customs Guarantee in place which ‘underwrites’ any potential and actual customs debt. This allows HMRC to call upon this guarantee from the business’ bank in the event of a default or irregularity. HMRC is also planning to remove the need for a Comprehensive Customs Guarantee for Duty Deferment Accounts.
Up until now many overseas businesses with a simple UK entity comprising solely of:
- a UK VAT number
- GB EORI and
- a registered address in the UK (such as their accountant)
can successfully apply to be fully authorised to operate these helpful suspensive and total relief regimes. No permanent entity with either resident staff or technical resources has been required by HMRC so far to be authorised. As long as the underwriting financial institution (UK-based or International) is on the Financial Conduct Authority or British Bankers Association approved list and the appropriate Deed of Guarantee to the required amount is agreed and accepted, then the business can operate these regimes.
However, if a Comprehensive Customs Guarantee is no longer required after 1 January 2020 then HMRC must take action to ensure that the Special Procedures are not abused or subject to fraud. This will not only mean reviewing and assessing the entity’s compliance history and risk of insolvency, which they state they will do as a matter of course, but they must surely place extra restrictions on establishment to ensure that HMRC have an entity to whom they can chase a debt. This is likely to require a firmer presence of the business in the UK than it currently holds.
Further, the three stage approach outlined in the Border Operating Model to facilitate the movement of goods from the EU to the UK and allow businesses to take advantage of the six-month deferment of documents and duty payments requires the business to have access to a Duty Deferment Account. Many EU businesses currently trading with the UK in their own name and not established in the UK may want to take advantage of this for the sake of business continuity. Additionally, many will want to hold their own Duty Deferment Account rather than pay to use their shipping agent’s Deferment Approval Number. However, although they may be able to be successfully authorised to use a Duty Deferment Account there is an additional, less publicised hurdle of having to have a UK bank account from which HMRC can debit the deferred duty payments. Given the current banking compliance environment, this could prove problematic to many overseas businesses without a bigger presence in the UK making it eligible for a UK bank account.
It is the above small, but significant, hurdles that businesses should begin to consider as the plan of how goods will move after 31 December 2020 becomes clearer. As always, the devil is in the detail.
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