Rules of Origin - Claiming a Preferential Rate of Duty
Following Brexit, HMRC is extremely active in undertaking a high volume of audits relating to preferential origin. What is evident is that although the government has made it reasonably easy to claim preference at import, and to convey UK preferential origin at export, the requirements are both exacting and complex. HMRC is adopting a very aggressive approach towards assessments because many importers and exporters either misinterpret, or do not understand the rules for claiming under a preferential rate.
This increased likelihood of HMRC checks means that it’s essential for businesses to correctly apply the rules of origin to their imports and exports, and adequate paperwork should be held by the business to support claims should HMRC request it.
It’s important to note that just because something is shipped from Europe does not make it duty-free at import into the UK. This is because, to obtain preferential origin, two things need to happen;
- The item in question has to have been sufficiently processed in the exporting country
- If components or raw materials used in manufacture are not of UK or EU origin, then there are product-specific rules that govern whether that item can still be deemed to be of EU/UK origin.
As the rules are complex, this issue has become more relevant in a post-Brexit world. In our experience, there is still misunderstanding as to when and how origin applies, whether this is in relation to the UK-EU trade agreement, or those between the UK and other countries.
Where origin is claimed incorrectly, businesses leave themselves open to assessment and penalties, so accurate reporting is important. To discuss how we could help your business correctly claim on its rules of origin, please contact our team of expert VAT consultants at enquiries@thevatpeople.com.
Case study
The VAT People assisted a French business that intended to import goods into the UK, but was incorrectly declared as importer of record, meaning import VAT paid by the business could not be recovered.
Our team assisted in correcting the business’ UK VAT position, confirming retrospective VAT registration, and amending import declarations so that approximately £300k of import VAT could be recovered, we also submitted the business’ UK VAT returns, accounting for output VAT as appropriate.
UK VAT can be a complex area for businesses based outside the UK, as local tax obligations may differ. Despite this, UK VAT-registered businesses must ensure that their UK VAT obligations are met, both retrospectively and on an ongoing basis. To discuss your business’s requirements in further detail, please contact our team of expert consultants on our free VAT helpline at 0161 477 66 00 or email us at enquiries@thevatpeople.com.