Are you looking for a way to streamline finances on your import and export documentation? If so you’ll be pleased to know that UK Customs allow deferment until the 15th of the month, provided that physical imports are complete.
But is it worth setting up a duty deferment account for your European logistics company?
What is duty deferment?
Ordinarily, you may have to pay for every individual consignment. With a duty deferment account, you can roll those payments into one per month.
The benefits of duty deferment
Duty deferment means you can clear and deliver goods without having to pay immediately. However, there’s a process you must follow before this can happen.
How to benefit from duty deferment
The first step is to create a deferment account. Customs will help you do this and agree on a reasonable maximum limit. This figure will be calculated to cover at least one month’s duty and VAT liabilities.
European logistics companies benefit from better cash flow this way, as customs charge nil interest.
In fact, deferment is a legal requirement for logistics companies that use customs warehousing and you must also provide a guarantee sufficient enough to cover two months’ worth of liabilities.
How do you get a guarantee?
European logistics companies normally organise their affairs through a conventional bank. However, this can sometimes cause problems arising as the direct result of conditions imposed by the bank.
In some cases the restrictions can be prohibitive enough to render the duty deferment unviable, restricting capital to the point that alternative solutions need to be sought. But in most cases, companies are able to set up their guarantee without any issues and start benefiting from improved cash flow.
Getting the most from your duty deferment account
Presuming restrictions by your bank don’t negate the benefits of deferring your duty, the following guidance will come in useful:
When can’t you defer duty?
European logistics companies can’t defer if:
- the agreed account limit for the month in question has been exceeded
- there are insufficient funds in the account to cover the deferment
- a compliance or payment issue has resulted in your account being paused.
The resultant effect of deferment being refused is delayed clearance. So, before presenting your import and export documentation, your account would need to be updated in the appropriate way.
What can be deferred?
The following are eligible for deferment under Customs criteria:
- Interest fees charged on customs debts
- Charges due under the EU’s Common Agricultural Policy
- VAT for excise duty
- Tobacco excise duties
- VAT for imports
This list is not definitive and covers a broad range of items and situations, providing plenty of opportunities for your business to improve its cash flow.
What must you pay?
European logistics companies must pay any duty due — including import VAT — each calendar month on the 15th day. (Unless that day is a weekend, in which case, you must pay on the next working day).
Overall, this means you could delay paying duty for two to six weeks, giving you the potential to benefit from 30 days of credit on average. Making one payment, rather than paying after every consignment, can make managing your finances smoother.
How to pay Customs
To pay Customs, you need to set up a direct debit for BACS payments . In each case, the full amount for the accounting period in question will be debited – i.e on the 15th of each month or the next available working day.
It’s worth noting that, if the amount you’re paying exceeds £10 million, you’ll need to make alternative arrangements. In this case, you’ll need to speak to CHAPS (Clearing House Automated Payment System).
What if a payment fails?
Customs will consider the account in arrears and suspend it until they have received the full amount via direct debit. Depending on the reason, you may have to pay interest on the outstanding amount. Additionally, Customs could withdraw the deferment facility in cases where a logistics provider continually failed to make payments.
So, why set up a duty deferment account?
On the whole, duty deferment can make Customs payments smoother and more manageable for European logistics companies. By delaying payments on each import or export consignment, you can pay everything in one go. Because you’ll usually make duty deferment payments on the same day each month, you can plan ahead more efficiently and manage cash flow, ensuring sufficient funds are in place first.
In addition, you’ll pay your fees by direct debit too, minimising the chance of going into arrears.
Need further logistics guidance?
To discuss the benefits of duty deferment or any other aspects of European logistics, feel free to get in touch with AMCO for support.