July 16, 2024
His Majesty's Revenue and Customs’ (HMRC) crackdown on non-resident importers using 'letter box companies' could leave customs agents and freight forwarders liable for massive tax bills. Here, we cover the two key options to ensure compliance and avoid financial pitfalls.
HMRC focus
There has been recent focus from HMRC on what constitutes an established business in the UK when importing and exporting goods. There have been numerous non-resident importers setting up ‘letter box companies’ in the UK, applying for a VAT number, an EORI number and then not honouring the payment of import taxes. This has cost HMRC millions in lost taxes as there are no means of recovering money from these businesses that do not ‘exist’.
The Gov.UK website offers guidelines on what established means, which explains that “a company is established in the UK if it’s incorporated at Companies House” or “you can be established in the UK if you have a permanent place in the UK where you carry out business activities”. However, if you have a UK VAT or EORI number, “this does not necessarily mean that you are established in the UK”.
What this means for customs agents and freight forwarders
With HMRC cracking down on these lost taxes, we are seeing more and more cases of customs agents and freight forwarders being held liable for the import taxes where they have acted as the ‘declarant’.
Because the importer is not deemed to be an established entity in the UK, the clearance has defaulted from ‘Direct Representation’ to ‘Indirect Representation’. We were recently learned of one freight forwarder receiving a bill for £600,000 for their client’s unpaid taxes and another having to close its doors as they couldn’t afford to pay the debt they found themselves jointly and severally liable for.
What can customs agents and freight forwarders do?
For customs agents and freight forwarders looking to work with non-resident importers into the UK, you have two options:
- Ensure the non-resident importer is properly established with the evidence required, including “details of where the staff are employed and the work they carry out” and “physical premises owned or leased by the business”.
- Alternatively, work with a third party ‘agent’, such as Fiscal IOR, to indirectly represent the importers, which avoids the need for the importer to employ staff or setup premises.
What we can offer
Fiscal IOR can support non-resident importers and customs agents in clearing the goods compliantly and provide piece of mind that HMRC won’t be knocking on your door.
For more information, please get in touch.
Further information and support can be found from BIFA (British international Freight Association).