Help with customs declaration

HM Revenue and Customs allow you to use the services of the freight forwarder, customs agents and fast parcel operators to help with your customs declaration. Before anything else, first, you must get an EORI number that starts with GB if you in the business of imports and exports into and out of the UK.

It is very easy to apply for your EORI if you do not have one yet. You must apply for your EORI number with HMRC. You can do this online. For your application, you would require your company’s UTR number, VAT number (if you have one). Furthermore, HMRC would also require your company incorporation date and SIC code. You can get this information from your last confirmation statement submitted to Companies House.

Beginning on 01 January 2021, imports and exports between the UK and the EU must use EORI number starts with GB. This is because of the UK no longer part of the single market, the eurozone.

Freight forwarders

Freight forwarders move goods around the world for importers. Generally, A freight forwarder will arrange clearing your goods through customs. They’ll have the right software to communicate with HMRC’s systems.

You can find out how to use a freight forwarder on the British International Freight Association and Institute of Export websites.

Customs agent or broker

Customs agents and brokers make sure your goods clear through customs. You can hire a customs agent or broker to act as a direct representative or indirect representative.

Use your own name but handle by an agent directly

You can hire a person or business to act in your name to handle your customs declaration. For this, you will be responsible for:

  • keeping records
  • the accuracy of any information provided on your customs declarations
  • any Customs Duty or VAT due

The advantage of having someone to represent you directly is that If you give clear instructions and they make a mistake, they may become jointly and severally liable.

However, you cannot ask someone to act directly if they are submitting your declarations using:

  • simplified customs procedures
  • entry in the declarant’s records

When acting directly, even if they have authorisation, they can only submit those types of declarations if you have authorisation.

A customs agent used their name to act for you

There are customs agents who use their own name to handle the customs declaration. This means the agent and yourself are equally responsible for making sure the information is accurate. Consequently, you both are jointly and severally liable for any duty or VAT.

You can get an indirect agent with the authorisation to make declarations using:

  • simplified customs procedures
  • entry in the declarant’s records

However, you cannot ask an agent to act indirectly if you’re declaring goods for:

  • inward processing
  • outward processing
  • temporary admission
  • end-use relief
  • private customs warehousing

Fast parcel operators

Fast parcel operators transport documents, parcels and freight across the world in a specific time frame. They can deal with customs for you, as part of their delivery.

They cannot act on your behalf without written instructions from you. The instruction must show whether they’re acting for you directly or indirectly. HMRC will only ask for evidence of the authorisation if we need it.

Transfer of VAT number

You may request a transfer of the VAT number of the business you acquired. It is very important you discuss this matter with the seller beforehand.

Normally, when a VAT registered company is sold or transferred, the seller would complete the form VAT 7 to de-register from VAT for the business. The new owner would register for VAT for the business in his own right.

Both seller and buyer must agree

However, if it is beneficial to keep the existing VAT number of the business, you and the seller must agree with the transfer. For this purpose, you must complete the form VAT68 and the form VAT1.

Once the transfer is approved by HM Revenue and Customs (HMRC), it cannot be revoked.

Once you have completed and signed the form, please send it to:

HM Revenue & Customs
VAT Registration Service
Imperial House
77 Victoria Street
Grimsby
Lincolnshire
DN31 1DB

Outstanding VAT and VAT refund

After the transfer is successful, if there is any outstanding VAT, you would have to pay for it even though it is inherent from the seller. Likewise, if there is any VAT refund, you would entitle to it not the seller.

The seller must also give you their VAT records.

Others important matters

The seller would cancel their direct debits for the VAT and remove their accountant’s access to the VAT online account.

If you would like to continue to use the seller’s accountant to take care of your VAT returns, you must inform the HMRC within 21 days of the form VAT68 being signed.

You must set up new direct debits for the VAT.

VAT and corporation tax

VAT and corporation tax is two different taxes administered by HM Revenue and Customs.

Your limited company is legally required to pay corporation tax if your company has made a profit and submit your corporation tax return with HM Revenue and Customs (HMRC).

If your limited company is registered for VAT with HMRC then your company is legally required to charge VAT to your customers and submit VAT returns to HMRC.

VAT

Let say, your company is selling children clothing, the applicable VAT rate is zero percent, your price for a pair of child’s trouser is £20 and the VAT rate for children’s clothing is zero percent. Your customer will pay you £20.

If your are selling website coding services, you would charge a standard VAT rate of 20% to your customers. Say, your project fee is £1000 and your invoice to your customer would be £1000 + 20% VAT and the final invoice price is £1200. The £200 collected is VAT. This amount is called output tax.

The £200 belongs to HMRC. Thus, your company is technically collecting the VAT on behalf of HMRC. Then, you report this output tax collection in your VAT return.

Corporation tax

Your company pay corporation tax on when there is a profit. Let use the website coding services business to illustrate how corporation tax is computed. Let say, your company only have one sale that is £1000 + 20% VAT equal to £1200.

When preparing your company account, you book only £1000 as your sale not the whole £1200 because the £200 of VAT belongs to HRMC and it is not your earning. Then you deduct any expenses you incurred to deliver the website coding services, say stationery cost of £150 (excluding VAT). Your profit is £850 (£1000 less £150). The current corporation tax rate is 20%, your corporation tax liability would be £170. Your company would report this tax liability in your corporation tax return called CT600 and submit it to HMRC.

HMRC published the current corporation tax rates .

No double counting of taxes

As you can see from the illustration above, your company would not pay double taxes on your business income. Basically, you collect VAT on behalf of HMRC from your customers. And, your VAT is excluded from your corporation tax computation.

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