Trading Places? VAT and customs treatment of imports, exports and ‘intra-EC’ trading

This book introduces the main concepts and trade facilitation reliefs that businesses must understand if they are to trade internationally with the least intervention and disruption from the Tax Authorities. The worst-case scenario is for an importer to have their goods still within Customs’ control, instead of being where they are needed because the correct procedures have not been followed. Allied to this is the need for businesses to secure the release of their goods paying as little import duty and import VAT as possible. Whilst import VAT is recoverable by most businesses it is still a major cash-flow cost, which has to be funded. Import duty is an absolute cost so importers must review all available means to reduce or remove the duty payable. The European Community now has 27 Member States and, on behalf of the European Commission, each is tasked with controlling the movement of goods, capital and people both into and out of the EC. Ensuring that duties and taxes are collected, whilst allowing the free movement of goods, is a vital objective both to the Commission and each Member State. For example, Customs import duties are uniform across all Member States, being collected on behalf of the Commission, whilst each Member State levies and retains its own import VAT. In the UK, HM Revenue & Customs are required by the Commission to protect the EC’s borders and to prevent smuggling, avoidance and abuse. Whilst not wishing to hamper the international movement of goods, HMRC will always place their ‘policing’ duties above the commercial interests of any Business. Successfully managing the VAT and Customs duty issues affecting international trade requires a great deal of knowledge and expertise. The advent of the “Single Market” in 1993, which dictates how VAT on intra-EC trading is to be accounted for, has added to this burden. The VAT and Customs Regulations relating to international trade are constantly evolving with such regimes as the “Authorised Economic Operator” being introduced in the geo-political arena i.e. world governments and the Commission are using fiscal measures to tackle international security issues post “9/11”. The book highlights the means of importing goods and arriving at the Customs value on which import duty and import VAT are computed. It also provides commentary on export procedures and the VAT treatment of intra-EC trading, including potential fiscal barriers to exploiting non-UK markets. Chapters on potential pitfalls and planning for international trade provide the reader with an overview of ‘Best-practice’ when looking to import or export goods.

Contents 1 Introduction 1.1 Purpose of this book. 1 1.2 Definitions and Meanings. 4 1.3 The Extent of the “Territories” of the EC.. 6 2 Imports 2.1 Background. 11 2.2 Imports and “Acquisitions”. 11 2.3 Import VAT.. 11 2.4 Importer’s responsibilities and “EORI” numbers. 12 2.5 “Authorised Economic Operator” status. 12 2.6 Import duty and import VAT Deferment 13 2.7 “Simplified Import VAT Accounting” (SIVA) 13 2.8 Importation methods. 14 2.9 Import procedures. 16 3 Reliefs from import duty 3.1 Inward Processing Relief (IPR) 27 3.2 Processing Under Customs Control (PCC) 27 3.3 End-Use Relief. 28 3.4 Returned Goods Relief (RGR) 28 3.5 Outward Process Relief (OPR) 29 3.6 Rejected imports. 30 3.7 Temporary admission. 33 4 “Valuation” – valuing the goods for customs ad valorem duty 4.1 Method 1 – the transaction value. 39 4.2 Additions to the transaction value. 44 4.3 Items that can be excluded from the transaction value. 47 4.4 Method 2 – the value of identical goods. 51 4.5 Method 3 – the value of similar goods. 52 4.6 Method 4 – the selling price of the goods in the EC.. 52 4.7 Method 5 – the cost of producing the goods. 54 4.8 Method 6 – the “fall-back” method. 55 4.9 “Simplified Procedure Values” (SPVs) 55 4.10 Frozen meat in “round sets”. 56 4.11 Value of goods imported free of charge. 56 4.12 Value of imported “replacement” free of charge goods. 57 4.13 Value of used goods. 57 4.14 Goods used after purchase and before entry into the EC.. 57 4.15 Valuing rented or leased goods. 57 4.16 Goods “not in accordance with contract”. 58 4.17 Goods imported in “special situations” –import duty and import VAT.. 60 4.18 Rates of exchange. 62 4.19 “Place of introduction” to the EC.. 62 4.20 All Methods – additional considerations. 62 4.21 Transport costs. 63 4.22 Surcharges and currency adjustments. 64 4.23 Insuring the goods in transit 65 5 Valuation declarations and statements 5.1 “Season Ticket” Valuation statements. 67 5.2 Valuation rules for other Customs procedures. 67 5.3 Imported replacement products. 69 6 Import duty and import VAT reliefs 6.1 Aircraft ground and security equipment 77 6.2 Animals for scientific research – Notice 365. 78 6.3 Antiques – Notice 362. 79 6.4 Blood grouping, tissue typing and therapeutic substances – Notice 369. 79 6.5 Capital goods – Notice 343. 80 6.6 Chemical and biological substances for research – Notice 366. 81 6.7 Commercial samples of “negligible value” – Notice 367. 82 6.8 Decorations and awards – Notice 364. 82 6.9 Donated medical equipment – Notice 341. 83 6.10 Duty and VAT-free allowances. 84 6.11 Food and plants. 85 6.12 Gold. 85 6.13 Goods for disabled persons – Notice 371. 85 6.14 Electricity and natural gas. 87 6.15 Fuel, animal fodder and feeding stuffs, and packing for use during transportation 87 6.16 Goods imported for onward despatch to another Member State. 88 6.17 Goods for use by a charity – Notice 317. 89 6.18 Goods for test – Notice 374. 90 6.19 Goods related to war graves. 91 6.20 Inherited goods – Notice 368. 92 6.21 Miscellaneous documents and other related articles – Notice 342. 93 6.22 Museum and gallery exhibits – Notice 361. 94 6.23 Sailing “pleasurecraft” to the EC – Notice 8. 95 6.24 Scientific instruments – Notice 340. 97 6.25 Private gifts (postal packages) – Notice 143. 98 6.26 Returned Goods Relief (RGR) - Notice 236. 102 6.27 Visiting forces – Notice 431. 105 6.28 Visitors to the UK – Notice 3. 107 6.29 Visual and auditory materials – Notice 373. 111 6.30 Zero-rated articles including printed matter 111 7 Accounting for import duty and import VAT 7.1 What is the “Customs debt”?. 117 7.2 Accounting for import VAT.. 118 7.3 Recovery of import VAT.. 119 7.4 Goods imported into the UK by a third country/territory supplier 124 7.5 Remission of duty - calculating claims. 125 7.6 Offences. 126 8 Exports 8.1 Background.129 8.2 Types of export 130 8.3 Customs procedures relating to exports of goods. 132 8.4 Community Transit and the New Computerised Transit System (NCTS) 135 8.5 The “Transport International Routiers” (TIR) procedure. 135 8.6 “Admission Temporarie” – Temporary Admission (ATA) Carnet 135 8.7 Excise goods. 136 8.8 European Community export preferences. 136 8.9 Proof of export 137 8.10 Evidence of export under the New Export System... 139 8.11 Evidence of export under New Computerised Transit System... 140 8.12 Goods exported via another Member State. 140 8.13 Ports or airports without access to NES. 141 8.14 Goods exported to the Channel Islands. 141 8.15 Particular types of export – proof required. 142 8.16 Time limits for exporting the goods and for obtaining proof of export 144 8.17 “Time of supply” and “tax point” for exports. 145 8.18 Particular types of exports. 145 8.19 Trade Associations and contact details. 166 9 Intra-EC Transactions 9.1 Background. 169 9.2 Despatches. 170 9.3 “B2C” supplies and “Distance Selling”. 177 9.4 “New Means of Transport”. 178 9.5 Acquiring NMTs in the UK – unregistered persons. 181 9.6 Acquiring NMTs in the UK – VAT registered persons. 183 9.7 Arrivals and Acquisitions. 184 9.8 Transfer of an entity’s own goods to another Member State. 186 9.9 Temporary movement of goods. 186 9.10 “Triangulation” and “Chain Transactions”. 189 9.11 Supplies to diplomats and “international organisations” etc. 192 9.12 “Call-off” stocks. 193 9.13 “Consignment” stocks. 194 9.14 Excise goods. 194 9.15 Goods removed under “sale or return” arrangements. 196 9.16 Samples. 197 9.17 Goods sent for testing. 197 9.18 Record-keeping requirements. 198 10 “Best Practice” and Planning 10.1 Imports. 209 10.2 Exports. 210 10.3 Arrivals. 210 10.4 Despatches. 211 10.5 Summary. 212 Appendix A: Terms of Trade 1 Using the correct “Incoterms”. 215 2 Incoterms. 216 3 Seller’s or buyer’s choice of Incoterms?. 217 4 Checklist 217 Glossary Index