Duty Deferment Account: A Guide for UK Importers

Duty deferment is a convenient payment method for customs, import VAT, and excise duty. With a duty deferment account, you have the flexibility to delay payments for customs duty, import VAT, and excise duty. Instead of paying for each individual consignment upon import or release from an excise warehouse, you can make monthly payments to HMRC through Direct Debit.

Think of a duty deferment account as a trusty sidekick for importers. It offers a valuable line of credit, allowing them to pause customs duty and tax payments for imported goods. This flexibility is a game-changer, helping businesses navigate the challenges of importing and strategically managing cash flow.

Importing goods into the UK entails complicated financial obligations like customs duties and value-added tax (VAT). These costs can be burdensome, affecting competitiveness and financial stability. However, with a duty deferment account, importers gain a powerful advantage—they can postpone payments. This maintains a healthy cash flow and opens opportunities for overall financial improvement.

Account Establishment: Importers interested in utilizing a duty deferment account must apply with their local customs authority. The application process involves submitting the necessary documentation and meeting specific eligibility criteria.
Credit Limit: Upon approval, importers are assigned a credit limit for their duty deferment account. This limit represents the maximum amount of import duties and taxes that can be deferred.
Deferring Payments: When importing goods, importers can provide their duty deferment account details to customs authorities. Instead of paying the import duties and taxes immediately, these amounts are recorded as deferred payments.
Accounting and Reporting: Importers are typically required to maintain accurate records of the deferred duties and taxes, along with any additional information required by customs authorities. Regular reporting may be necessary to reconcile the deferred amounts.

Why Should You Establish a Duty Deferment Account?

Establishing a duty deferment account offers numerous advantages for UK importers. It provides them with financial flexibility, cost savings, and improved cash flow management. Let's explore the benefits in more detail by answering related questions:

What are the advantages of a duty deferment account for UK importers?

Establishing a duty deferment account is advantageous for UK importers due to the following reasons:

Financial Flexibility: With a duty deferment account, importers gain the flexibility to defer payment of import duties and taxes. This allows them to allocate their financial resources strategically, ensuring that they have sufficient funds available for other business needs.
Cost Savings: By deferring the payment of import duties and taxes, importers can effectively manage their costs. This enables them to use the funds that would have been allocated for duties and taxes to invest in business growth, such as product development, marketing, or expanding operations.
Improved Cash Flow Management: A duty deferment account empowers importers to optimize their cash flow by postponing duty and tax payments. This flexibility can be particularly valuable during periods of fluctuating sales or economic uncertainties. Importers can better manage their financial obligations and maintain a healthier cash flow, which is crucial for the overall financial stability of their business.

In what ways does a duty deferment account streamline the customs clearance process?

A duty deferment account streamlines the customs clearance process for importers by enabling expedited procedures, reducing delays, and ensuring smoother operations. It simplifies documentation requirements, serving as a payment guarantee and reducing administrative efforts. Additionally, it offers a centralized payment system, allowing importers to make a single payment for multiple shipments, streamlining accounting and financial management. This eliminates the need for individual financial transactions for each shipment, saving time and reducing administrative efforts during the preparation and submission of documentation.

What are the eligibility criteria and requirements for a duty deferment account?

Perhaps you're curious about your eligibility and the specific requirements for a duty deferment account. Let's delve into the details and explore them thoroughly :

Who is eligible to benefit from a duty deferment account?

A duty deferment account is available to UK importers who engage in regular import activities. It is particularly beneficial for businesses that import goods on a frequent basis, as it provides them with financial flexibility and streamlines their customs processes. Both large corporations and smaller businesses can qualify for a duty deferment account, subject to meeting the necessary criteria.

What documents are needed to establish a duty deferment account?

Before establishing a duty deferment account, you should make sure you have all documents needed. Here is a list of the common document required :

- Business Registration: You must be a registered business entity, such as a sole trader, partnership, or limited company, involved in importing or releasing goods into Great Britain.

- EORI Number: You'll need a valid Economic Operator Registration and Identification (EORI) number. This unique identifier is assigned to businesses for customs purposes. If you don't have one, you can register for it on the dedicated page of the official UK government.

- Financial Stability: The HM Revenue and Customs (HMRC) will assess your financial stability to ensure you can meet your duty and tax payment obligations. While specific financial requirements aren't mentioned, your business should demonstrate financial solvency and the ability to fulfill payment responsibilities.

- Other Documents: Depending on your business type and goods, additional documents may be necessary. These could include import licenses or certificates for specific goods, evidence of trading activity (e.g., sales invoices or purchase orders), or any other relevant documentation requested by the HMRC.

- Supporting Documents: Alongside your application, you'll need to provide supporting documents, such as:

Bank Statements: Recent bank statements that demonstrate your business's financial standing and transaction history.
Financial Accounts: Your most recent financial accounts, including profit and loss statements and balance sheets. These documents provide insights into your business's financial performance.
VAT Registration Certificate: If your business is registered for Value Added Tax (VAT), include a copy of your VAT registration certificate as proof.
Guarantor's Undertaking: In some cases, a guarantor's undertaking may be required. This is a written guarantee from a third party, like a bank or financial institution, stating they will be responsible for any unpaid duties or taxes if your business fails to make the payment.

What are the steps to apply for a duty deferment account?

If you want to establish a duty deferment account, here is the general order in which you should proceed:

First, check if you have all the documents needed (seen above) and if you meet the eligibility criteria for applying for a duty deferment account. To utilize a duty deferment account in Northern Ireland or the UK, you must fulfill two requirements:

You must be an importer or a representative of importers.
You should have an approved guarantee or waiver.

Do I need a financial guarantee to apply for a duty deferment account?

Yes, if you want to apply for a duty deferment account, you need a guarantee. You can either use a guarantee or apply for a guarantee waiver approval. The main difference between having a guarantee and a guarantee waiver for a duty deferment account is the financial obligation and risk involved.

How to apply for a guarantee waiver?

You can apply for a waiver if you have:

no serious or repeated infringements of customs or tax rules in the past 3 years
no record of serious criminal offenses related to your business activities in the past 3 years
held positive net assets (excluding goodwill) at the date of your application and for the past 3 years (or, if shorter, for the period you have been trading)
positive net assets (excluding goodwill) greater than the value of the waiver you are applying for at the date of your application, and at your most recent balance sheet date, to qualify for a guarantee waiver for an amount over £10,000

If you need to defer amounts above £10,000 per month but don't qualify for a full guarantee waiver, you may still be eligible for a partial waiver of up to £10,000. A guarantee would only be required for the additional amount. Additionally, being established in the UK is a requirement. If you hold the status of an Authorised Economic Operator for Customs (AEOC and AEOF), you are eligible for a guarantee waiver up to your deferral limit.

If you are not applying for, or have not received a guarantee waiver approval, you will need to provide a guarantee from a financial institution that’s established in the UK and regulated by the Prudential Regulation Authority.

You should not submit a guarantee unless you're being asked to provide one after you have applied for a duty deferment account.

If you want to defer Customs Duty, you must:

Decide if you want to reduce financial guarantees by using Authorised Economic Operator customs simplifications (AEOC).
Apply for a duty deferment account and guarantee.
Ask your bank, building society, or insurance company to guarantee your duty payments.
Fill in a Direct Debit Instruction.

Apply to defer excise duty

Any excise duty postponed at importation or released from an excise warehouse would be subject to this application. You can also use the Excise Payment Security System for non-importation duty deferment or releasing goods from an excise warehouse.

If you want to defer excise duty, such as tobacco, alcohol, or certain oils, you must:

Decide whether you want to reduce financial guarantees using the Excise Payment Security System.
Apply for a duty deferment account and guarantee.
Ask your bank, building society or insurance company to guarantee your duty payments.
Fill in a Direct Debit Instruction.

Apply to defer import VAT

You can apply to defer import VAT if you are a trader who is either:

not VAT registered
VAT-registered and not accounting for VAT on your VAT Return

If you use postponed VAT accounting for imports, you do not need to apply for a deferment account to defer import VAT.

If you are registered for VAT, you do not need a duty deferment account to postpone payment of VAT. You can defer when you account for import VAT on your VAT Return.

To defer VAT if you are not registered for VAT or do not want to account for import VAT on your VAT Return, you must:

Decide whether you want to reduce financial guarantees using Simplified Import VAT Accounting.
Apply for a duty deferment account and guarantee.
Ask your bank, building society or insurance company to guarantee your duty payments.
Fill in a Direct Debit Instruction.

What should I do after I applied for a duty deferment account?

Upon approval of your application, it should be processed within 30 working days after receiving all the necessary information. If a financial guarantee is required, the processing time may be longer.

Once your application is approved and a Direct Debit is established, you will receive a deferment approval number. This number should be used for import declarations or removing goods from an excise warehouse.

Even if you don't plan to use your duty deferment account immediately, it's important to provide your direct debit instruction during the application. This may result in a delay in activating your account when you need it.

If your requested deferral limit exceeds the amount covered by your guarantee waiver, we will provide options such as obtaining a full or partial guarantee or accepting a reduced deferral limit. Failure to respond within 30 days may result in the rejection of your application.

When should I pay my deferred taxes with my duty deferment account?

When deferring Customs Duty, import VAT, and excise duties, the payment is made as a total sum for the deferred amount within a specific accounting period. For Customs Duty and import VAT :

The payment is due on the 15th of the following month
The next working day if the 15th is not a working day.

This allows for an average credit period of 2 to 6 weeks, approximately 30 days.

The same accounting period applies to excise duty, with payment due on the 29th of the following month or the working day before if the 29th is not a working day. VAT-registered individuals can account for import VAT on their VAT return.

How do I pay my deferred taxes with my duty deferment account?

Payments for deferred duties and import VAT must be made in pounds sterling using the BACS system or Direct Debit. The total deferred amount for the accounting period is automatically debited from your bank account and transferred to the designated bank account on the payment day. However, if the deferred amount exceeds £20 million, you must contact the Duty Deferment Office to obtain information on paying via CHAPS (Clearing House Automated Payment System).

Q&A | Duty Deferment Account: A Guide for UK Importers

What are the different accepted methods of payment for duty deferment accounts?

Duty deferment accounts typically allow payments through Direct Debit, bank transfer, or other approved payment methods. Specific payment options may vary depending on the customs authority or country.

How does deferring payments for customs duties, import VAT, and excise duty work through a duty deferment account?

When using a duty deferment account, importers can defer the payment of import VAT for a specific accounting period, typically one calendar month. The deferred import VAT, along with any applicable Customs Duty, is then paid as a consolidated sum on the 15th of the following month or on the next working day if the 15th is not a working day. This allows importers to manage their cash flow more effectively by deferring the VAT payment to a later date, providing greater financial flexibility for their business operations.

Who is eligible to have a duty deferment account and what are the required qualifications?

Eligibility for a duty deferment account depends on the customs authority's regulations. Generally, importers, customs agents, or representatives of importers can apply for a duty deferment account.

What happens if a payment is missed or delayed for a duty deferment account?

If a payment is missed or delayed for a duty deferment account, it may result in penalties or consequences imposed by HMRC (Her Majesty's Revenue and Customs). These penalties can include interest charges, late payment fees, or the suspension or revocation of the duty deferment account. It is important to ensure timely and accurate payments to avoid any potential issues or disruptions in customs processes.

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