Are you stuck with Customs duty on your returned goods?
The impacts of the Covid-19 pandemic and Brexit are still being felt by many businesses’ trading internationally. One of the issues that businesses in the UK and the EU are still facing is paying import duties when goods are re-imported.
Let’s take an example – your business manufactures sofas in the UK, and exports them to customers based in a country outside the UK . However, due to some civil unrest, the concerned country is not allowing any imports from other countries for the time being. The sofas are returned to the UK. The question is do you have to pay customs duty when your own goods are returned?
The basic rule is that on every import to the UK, custom declarations need to be completed and without special rules you will have to pay custom duties and import VAT. But is this the end of the story when it comes to UK manufactured goods which are being returned due to problems which are outside of your control?
The good news is that there is a relief called Returned Goods Relief (RGR) which solves the issue of paying customs duties and import VAT on re-imported goods.
The conditions for the relief to apply are:
- The goods must be of UK origin and been in free circulation in the UK ;
- They are re-imported within a 3-year period of being exported. The 3-year period can be extended with HMRC’s approval; and
- They are re-imported in the same state in which they were exported.
If these conditions are satisfied, goods can be re-imported without any import duty.
The person importing them into the UK must be the same person who exported them. You cannot claim this relief if you are re-importing goods that someone else sold or moved.
The importer must also have an import licence.
As noted above, the re-imported goods must be in the same condition as they were originally exported. There is an exception to this. The goods can be “handled” – which means they can undergo operations, but only if the purpose is to maintain them in good condition. But you cannot alter them to increase their value.
This relief is a great opportunity for UK businesses especially those who are dealing in import/export with the EU.
Until 31 December 2020, the UK was part of the EU single market and therefore, there were no customs formalities when buying/selling goods to/from the EU. We have noticed that UK businesses who only dealt with the EU for trade prior to 31 December 2020 are not aware about many of the customs reliefs available to them.
RGR is one of the customs reliefs which can save both customs duties and import VAT even though import VAT is recoverable under normal VAT recovery rules.
This mechanism can be very useful for any UK importers or exporters. It is also worth noting that goods that were in the EU before 31st December 2020 can be re-imported using the Returned Goods Relief regardless of how long ago it was that they were originally exported from the UK. In short, the 3-year time limit will not apply to these goods. However, the re-importation must be carried out before 30th June 2022.
What do you need to do to claim RGR?
On re-importation, you will need to attach evidence that the product was originally exported. This could be in the form of an export declaration, or an information sheet that may have been completed at the time of export by the Customs authorities.
On your import declaration, the C88, it is important to ensure that you use the correct Customs Procedure Code (CPC). This will tell the authorities that you are importing the goods under RGR and therefore you do not have to pay the full duty.
If you have any questions or comments regarding the above, please get in touch on firstname.lastname@example.org