Common Ways Import Duty Is Overpaid

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In a busy company customs and international trade operation it is often not easy to keep on top of absolutely everything you need to all of the time. With the best will in the world occasionally something gets missed, new developments do not always register straightaway, and even with the best systems in place, errors occur, whether yours or those of companies you work with.

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This can sometimes lead to the overpayment / underpayment of customs duty(s)/tax(es). However, with the right tools and support these instances can be promptly identified in your historical customs declaration data, extracted, collated, and submitted to His Majesty’s Revenue & Customs (HMRC) in the form of a customs duty reclaim. This is one of the many areas in which BKR supports its clients.

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How does duty get overpaid?

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There are a number of common ways in which you can unintentionally overpay customs duty (and thereby, also import VAT), some of which you may already be familiar with:

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• Use of an incorrect commodity code – If you classify your goods incorrectly under the UK Trade Tariff then there is a good chance the duty rate applied will be incorrect.

• Customs valuation error – If you use the wrong valuation method, or fail to take account of relevant adjustments, there is a risk that the customs value you arrive at for the calculation of customs duty (and import VAT) is not right.

• Customs origin – Lack of understanding of the applicable customs preferential / non-preferential origin rule requirements (including product specific rules) for your goods can lead to you paying more (or indeed less) customs duty than you need to.  

• Preferential trade agreements – Overlooking trade agreements covering your goods and markets may mean that you are not claiming the customs duty relief your imports are entitled to.

• Customs Reliefs  – If you are not availing yourself of other customs reliefs that may be applicable to your imports then you may be paying more customs duty than necessary.

• Data-entry errors – Entering customs information into relevant systems incorrectly when making a customs declaration or when instructing others to do so on your behalf.

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Getting You Your Money Back

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BKR is very experienced in successfully helping companies to reclaim customs duty which, for one reason or another, was overpaid or otherwise paid unnecessarily. Our specialist data analysis ‘tool’ can quickly identify where duty has been overpaid, and our advisory support can assist you in applying to HMRC to receive timely repayment of any duty owed to you.

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We have helped clients recover £-millions in recent years, and have provided follow-on guidance to them which has helped our clients achieve further savings through the implementation of improved processes and procedures going forward.

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HMRC customs reclaims (referred to as ‘repayments or remissions’) allow individuals and businesses to claim a refund for overpaid import duty and VAT, or to recover charges on goods that are returned or defective.

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Typical situations for which a reclaim can be made are where you:

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• Were incorrectly charged or overpaid import duty and/or VAT

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• Imported goods that were found to be defective, damaged or not in conformity with the contract and are being exported or destroyed.

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• Temporarily exported goods (e.g. for repair) which are  returned to the UK

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• Made errors on your customs entry (or your agent did)

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Time limits apply to encourage timely reclaim submission. Typically reclaims should be submitted to HMRC within three years of the date of the relevant customs declaration, although the time line can vary depending on the basis of the reclaim, for example, it is one year for ‘rejected goods’ based claims.

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BKR can ensure that the most appropriate method is used for any reclaim you need support in making. We are able to help you to promptly identify any such opportunities using your historical customs declaration data. We can extract the relevant data and  collate it for you, then put it into an appropriate format and submit it on your behalf in a formal reclaim application to HMRC.

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Best To Have A Strategy

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Once we have established whether you are owed (or owe) money by HMRC and helped you get it back (or to remit any underpayments) we can work with you to review your relevant customs processes and procedures, and support you in the implementation of improvements where needed, as part of a forward looking duty management strategy to enable you to routinely pay the right amount of duty / tax at the right time to improve your company’s compliance and risk standing with HMRC.

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A customs duty strategy is a structured approach to managing your customs and international trade activities with a focus on reducing and optimising customs duty and import VAT liabilities. The overarching aim would be to ensure efficient use of your internal resources while delivering measurable cost savings to your business. This we achieve with you through a co-ordinated and strategic effort to manage and reduce your company’s exposure to customs risk.

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We deliver this in a number of ways, including tariff classification reviews, supply chain optimisation, duty planning, forward and duty recovery. Importantly, businesses that implement a clear duty strategy not only benefit from increased savings and a reduced tax burden, but also achieve higher levels of compliance and a more efficient and resilient supply chain.

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How BKR Can Support

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At BKR we have a wealth of experience and expertise with which we can help you to realise any monies you may be owed by HMRC by, among other things:

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• Using our special software ‘tool’ to audit and analyse your customs declaration data to enable any errors to be spotted and remedial action to be taken. Such as the amendment of incorrect declarations, or the reclaiming of any overpaid duty (or the payment of any underpaid). We help you to spot discrepancies before HMRC does.

• Reviewing the customs commodity codes you are using and the customs valuation calculations you are making, to provide you with an objective assessment as to their correctness, enabling you to reclaim any overpaid duty. We can also provide support to you in applying to HMRC for a formal Advance Tariff and/or Valuation Ruling to reduce your customs risk.

• Advising on the customs origin rules requirements (preference and non-preference) for your goods, which may lead to duty savings and justify a duty reclaim. We can also provide support to you in securing a formal HMRC Advance Origin Ruling to add commercial certainty.

• Drafting your application for any HMRC special procedures you may wish to be considered for, to improve your business operations, for example customs warehousing, inward processing, authorised use etc.

• Providing tailored technical customs administration training for your business.