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How do you set up an account to defer duty payments when you import goods?

Setting up a deferment account is crucial for smooth importing, argues Arne Mielken, Customs Advisor of Customs manager Ltd.

A deferment account provides an easy solution for your customs duties and taxes. It allows traders to defer payments to customs, which benefits cash flow.

Why may a duty deferment account be useful?

When goods are imported into a country, they may be subject to import sales tax and customs duties. These duties must be paid in full to the customs authorities at the time of import. Having a deferment account for your business can help to ensure your high-value shipments are cleared quickly, allowing you to work more efficiently while saving time and money.

Faster customs clearance

A deferment account means that no further credit checks, particularly those for high-value shipments, are required. With your own deferment account, your goods can be cleared and delivered more quickly. The applicable costs are payable on the 15th of the following month. This means that you receive an interest-free payment deferment of up to 45 days.

There is only one accounting procedure per month, no matter how many import shipments you have.

What can you defer?

Businesses can apply for a duty deferment account to delay paying most customs charges, for example:

  • Customs Duty

  • excise duty

  • import VAT (if you’re not using postponed VAT accounting)

  • A duty deferment account lets you make one payment a month through Direct Debit instead of paying for individual consignments.

You can apply for a duty deferment account if you’re an importer, someone who represents importers, or you’re releasing goods from an excise warehouse.

When the customs authority has all the information to process your application, they will aim to complete this within 30 working days. If you need to apply for a financial guarantee, this may take longer.

Criteria for a Duty Deferment Account

In order to be authorised to operate a Duty Deferment Account, the applicant must meet certain criteria. The relevant criteria are:

  • A business must be established in the country/customs territory; this means within the UK or an EU Member State.

  • The business may be a legal entity or a natural person.

  • To be regarded as established in the UK or an EU Member State they must have a fixed place of business in the relevant territory where both the necessary human and technical resources are permanently present and through which their customs-related operations are wholly or partly carried out.

  • In the EU, the business must fulfil Regulation (EU) No 952/2013 Article 39(a) by having no record of serious or repeated infringements of customs law and no record of serious criminal offences related to economic activity.

  • The business must be a regular user of customs procedures, or operate a Temporary Storage facility, or fulfil Regulation (EU) No 952/2013 Article 39(d) demonstrating ‘practical standards of competence or professional qualifications directly related to the activity carried out.’

Financial Guarantee

Most businesses may need a financial guarantee with their duty deferment account.

Once you have been authorised to hold the Duty Deferment Account, you will be asked to supply the security in the form of an authorisation. This is usually completed by an approved bank or financial institution.

The UK (Great Britain) is an exception, a duty deferment account usually does not require a financial guarantee.

You will have the option to apply for a guarantee waiver to avoid the need to get a financial guarantee, or you can continue to get a financial guarantee.

What you can defer

You can usually defer:

  • customs duties

  • Import VAT

  • Excise duty VAT

  • Excise duties (including Tobacco Products Duty)

You usually cannot defer duty if:

  • you have exceeded your guarantee or account limit for the calendar month

  • the amount in your account or guarantee left for the calendar month does not fully cover the deferment requested

  • we have stopped the use of your account due to payment, or other compliance problems

  • If we refuse deferment, there will be a delay in clearance. It is important for you to have the correct guarantee or account level for any large import or peak period liabilities.

When you must usually pay

Customs Duty and Import VAT

You must pay the duties and Import VAT you defer during one calendar month (the accounting period) as a total sum, either:

  • on the 15th of the next month

  • on the next working day after it if the 15th is not a working day

This means that you can defer duties and Import VAT for between 2 and 6 weeks - an average of 30 days credit.

If you are registered for VAT business may account for import VAT on your VAT return.

About Customs Manager Ltd.

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