Duty Deferment is the practice of delaying payment for some kinds of duties and taxes on goods imported into the UK. If you regularly import goods into the UK, you might find it a useful tool for managing your cash flow and simplifying your importing process.
What is a Duty Deferment Account?
If you regularly import goods into the UK, you might want to apply for a Duty Deferment Account. The account lets you pay your customs duty, excise duties, and import VAT monthly via Direct Debit. Having a Duty Deferment Account saves you from having to pay for each consignment individually at the point of import.
The Customs Declaration Service is the service HMRC uses to manage all Import and Export declarations in the UK. Duty Deferment Accounts, Import VAT, Customs Duties and excise are managed through it. The Customs Declaration Service replaces CHIEF (Customs Handling of Import & Export Freight).
With a Duty Deferment Account, you can delay payment on:
- – Customs Duties
- – Import VAT
- – VAT on Excise Duty
- – Excise Duties (including the Tobacco Products Duty)
- – Interest charges on any customs debts you may have
- – Levies imposed under the Common Agricultural Policy of the EU
- – Positive Monetary Compensatory Amounts under the Common Agricultural Policy
- – UK and EU Anti-dumping or countervailing duties
If you want to use Duty Deferment on goods you’re importing to Northern Ireland, you’ll need a separate Duty Deferment Account in Northern Ireland. The Northern Ireland Protocol means that Northern Ireland remains in the EU single market for goods, and therefore is subject to EU Customs rules for goods. In turn, this means that goods imported into Northern Ireland need to be accounted for separately from goods entering the rest of the UK.
Do I need a Duty Deferment Account?
You only need a Duty Deferment Account if you want to delay payment on your customs duty, excise duties and import VAT. If you just want to defer your import VAT, you might be able to do so on your regular VAT return.
Businesses registered for VAT in the UK can declare and recover import VAT on their VAT Returns. If you pay VAT at customs, you can reclaim that amount on your VAT return later. Postponed VAT Accounting is the practice of declaring and immediately recovering Import VAT on your VAT return. In practice, you don’t pay import VAT at customs whilst using the scheme, and you don’t need a Duty Deferment Account to do it.
What are the benefits of a Duty Deferment Account?
The key benefits are:
- – Better cashflow
- – Faster customs clearance
- – Less paperwork
The main benefit of applying for a Duty Deferment Account is that you only need to make one payment for all your Customs Duty and Import VAT in a set period (usually monthly). It makes managing your cash flow and financial planning a bit easier.
Duty Deferment also makes customs clearance a breeze. You’ll have pre-authorised the payment of customs duties and import VAT. Customs authorities won’t need to hold your goods whilst they wait for payment. Plus, fewer payments and direct debit mean you’ll be doing less paperwork and admin.
Who can use Duty Deferment?
Anyone can apply for a Duty Deferment Account, whether your business is based in the UK or not. To apply for an account, however, you have to hold one of the following positions in your business:
- – Sole Trader
- – Company Director
- – Company Secretary
- – Trustee
How do I set up a Duty Deferment Account?
Before you apply for a Duty Deferment Account, check which kind you need. There are separate accounts for Great Britain (England, Wales and Scotland) and Northern Ireland. If you want to use Duty Deferment and Postponed VAT Accounting in both GB and NI, you’ll need both accounts. However, if you’re an excise-only trader and want an account for excise duties only, you only need one or the other.
For both Great Britain and Northern Ireland, you apply to HMRC through the Customs Declaration Service. You’ll need a UK Government Gateway account, but if you don’t have one, you can create one when you apply.
Before you start your application, get your documents together. You’ll need:
- – Your EORI number. You’ll need the number that matches where you’re applying, i.e your XI number for Northern Ireland.
- – The business name or trading name associated with your EORI number.
- – The address in the UK associated with your EORI number and an address where HMRC can contact you if they’re different.
- – Your registered company number, if you have one.
- – Your VAT number, if you have one.
- – The details (including dates of birth) of your company’s directors and officials. If you have them, this includes business partners, company secretaries and trustees.
- – An estimate of the duties and VAT you expect to defer (your estimated debt)
- – The details of the person responsible for customs authorisations, their details and some information about their practical customs experience.
Once you’ve submitted your application, it takes about 30 days for HMRC to process it. It can take longer depending on your circumstances and whether you need to apply for a customs guarantee.
Duty Deferment Guarantees
To apply for a Duty Deferment Account, you might need a customs guarantee. A customs guarantee is a legal agreement that you make to cover any customs debt that you already have (actual debt) or that you might incur from customs proceedings like Duty Deferment (potential debt). You get the guarantee from a financial institution (like a bank) that’s established in the UK and regulated by the Prudential Regulation Authority (PRA).
There are two kinds of guarantees: Individual and Customs Comprehensive. Which one you’ll need varies slightly depending on whether you’re applying for duty deferment in Great Britain or Northern Ireland. Find out which you need and how to apply for them here.
You’ll only need to submit a guarantee once you’ve applied for your Duty Deferment Account and HMRC has asked you to supply one.
As you apply for a Duty Deferment Account, you can apply for a customs guarantee waiver. Having a waiver means you don’t need a guarantee, but you can only apply for one if you’re based in the UK and meet specific criteria. If you want to apply for a waiver, you’ll need to submit:
- – Details of any time your business has broken customs or tax rules in the last three years
- – Your company’s financial records
You might also be prompted to submit various supporting documents:
- – Management Accounts
- – Financial Statements
- – Forecasts
- – Loan Agreements
- – Auditors Reports
Duty Deferment Limits
All Duty Deferment Accounts have a monthly deferment limit. It caps the amount you can import using the Customs Declaration Service software. The limit on your account is based on either the guarantee you applied for or your waiver.
How do I increase my Duty Deferment Limit?
If you’re close to hitting your monthly limit, you can “top up” your account by paying off some of the duties and VAT you’ve already deferred. Your upper limit will stay the same, but you’ll have some more space before you hit it.
Increasing your Duty Deferment limit permanently is recommended if you’re regularly going over it. How you do it depends on whether you have a guarantee or a waiver. If you have a guarantee on your account, you’ll have to ask your guarantor to fill in a form and amend your guarantee. You can amend your waiver yourself by submitting a form and some supporting documents.
How do I find my Duty Deferment Number?
Once your account has been approved, you’ll be given a Duty Deferment Account Number (DAN). The Duty Deferment Number is unique to your account. If you decide to appoint a forwarding agent or already have one, they’ll need it to declare your Imports.
You can use your forwarding agent’s Duty Deferment Number if you don’t have a Duty Deferment Account. Forwarding agents typically charge fees for this, which you’ll have to pay on top of reimbursing them the duties and VAT on your import.
How do I get copies of my Duty Deferment statements?
Duty Deferment statements show all your transactions and the total amount you have deferred. You’ll get one every week and a summary deferment statement at the end of the month. They’re used to reconcile your import declarations.
You can log in to the Customs Declaration Service to view and download copies of your Duty Deferment statements. You just need your Government Gateway ID and password. You can also get copies of your Postponed VAT Accounting documents and C79 VAT Certificates this way.
What is Postponed VAT Accounting?
Postponed VAT Accounting (PVA) was introduced by the UK government in January 2021. The scheme allows VAT-registered traders to account for and reclaim import VAT on their VAT return, rather than paying it upfront at customs.
As a UK VAT-registered importer, you can use postponed VAT accounting. If you are eligible to defer your supplementary declarations, however, you may not need to do so. This is an automatic scheme, there is no need to apply for it, according to HMRC.
This means you will need to report import VAT via your UK VAT return, including dates of importation. To do so, you will need to estimate the import VAT due from your records of imported goods. When you submit your declaration, this import VAT estimate must be as precise as possible to record on your later VAT return.
With Postponed VAT Accounting, you can defer VAT payments by using a duty deferment account as outlined above.
Non-VAT registered traders and any VAT registered traders not using postponed VAT accounting will need to report and pay VAT through customs processes.
Lastly, UK VAT-registered businesses using Deferred Declarations and those who are eligible to defer their supplementary declarations must use Postponed VAT Accounting.
What information will be required to submit your UK VAT return?
To complete your VAT return when using Postponed VAT Accounting, you will need the following import details:
- – All customs entries made in your commercial records
- – Copies of your monthly postponed import VAT online statement
You should always report postponed import VAT via the VAT return covering the date when you imported the goods into the UK.
Rules to reclaim any input VAT will continue to apply. All information needed to support a VAT reclaim will be included in the monthly statements made available to you.
This article was originally published on 10/01/2020 and has been updated for comprehensiveness.
