Customs and excise duties, procedures and regulations.

Customs and excise duties, procedures and regulations.

In the UK, excise duty is considered as an indirect tax which is added to goods

Mike Court looks at how this affects goods

The Excise laws in the UK are the Value Added Tax Act 1994, The Customs and Excise Management Act 1979 and The Alcoholic Liquor Duties Act 1979. Excise taxes are different from customs duties, (taxes generally charged on importation at the border).

The UK Excise customs regulations have evolved out of two main needs; to raise revenue for government, and to restrict the entry into the country of goods the government wants to restrict. Products such as tobacco and alcoholic drinks have been taxed in some form or other since early times.

In the UK and EU there are restrictions in place around the sale and production of these types of products. Details of the UK duties payable upon importation or manufacture of these goods can be found in the UK Trade Tariff.

Excise duties are different from VAT in three ways, they are applied to a narrow range of products, they are a lot higher (than VAT rates), and as a percentage they represent a higher level of the retail price. Excise duties are normally levelled per unit of the item whereas VAT is an Ad-valorem tax and is linked to the price of the goods.

Import duty, Value Added tax (VAT) and Customs duty are all based on the customs value of the goods rather than the quantity, the amount of duty is determined by the commodity code of the goods.

Excise duty is paid on certain types of goods, at different rates according to the type of products, whether they are manufactured or imported. It is based on the quantity of the goods rather than the value. The duty falls due at the time when the goods leave any duty suspension arrangements and when goods are released for consumption, generally via the warehouse system registered trader (REDS). There are different excise rates which are applied to different subcategories of goods. In addition to the commodity description and code number each excisable item is allocated a tax type code number, for example, 451 for spirits. This identifies the type and rate of Excise Duty payable. Code numbers are included in the UK Tariff which also lists tax codes which are declared on the Single Administrative Document (SAD) import document.

VAT is payable based on the value of the goods imported, including any customs or excise duty. If importing excise goods from outside the EU, businesses will become liable for UK excise duty on arrival.

Excise goods movements in the UK within the excise duty suspension programmes must take place between persons and premises that have been pre-approved by the appropriate authorities. Excise goods may only be moved under duty-suspension once the goods are in free circulation, meaning all duties and taxes have been paid. All movements of these excise goods which take place in the UK must be recorded on the Excise Movement and Control System (EMCS) unless the goods are allowed to move under simplified procedures.

UK-based business that are planning to receive, store and dispatch free circulation excise goods will first need to have their premises approved as an excise warehouse by HMRC. These businesses will need to hold an authorisation as a warehouse keeper. This warehouse can be located anywhere in the UK as long as it is approved by HMRC so that the goods can be stored without the payment of any duty for the period of storage.

The three types of goods that can be held as duty-suspension in an excise warehouse are all alcohol products, tobacco products, and energy products including hydrocarbon oils and biofuels.. Such goods can only be warehoused if they are intended for a duty-free purpose for example, goods for export. If the approved organisation want to export duty-suspended excise goods from the UK to non-EU countries, they will need to ensure that they comply with all excise requirements as well as any separate customs export declaration requirements. Note that HMRC does not allow UK manufactured tobacco products intended for use in the UK to be stored in an excise warehouse

When importing excise goods into the UK, or arranging the importation of, excise goods that are duty-paid, or released for consumption,  goods will be liable to excise duty in the UK. There are three different ways in which duty-paid excise goods can be imported into the UK for a commercial purpose, the standard UK duty-paid scheme for unregistered commercial importers or, the registered commercial importer scheme and/or the distance selling arrangement for sales to private individuals. Unless the goods are being dispatched under distance selling arrangements, movements of duty-paid excise goods between the UK and EU member states must be covered by a full customs declaration.

The purpose of the control of excise goods at export from the UK is to satisfy HMRC that the goods are no longer available in the UK.  Traders must obtain and retain official evidence of export when goods leave the UK.  The export of excise duty paid goods to countries outside the EU falls under standard export procedures which also apply to EU member states.  When these goods are exported, the goods must move from the excise warehouse to the port / airport of export under the Excise Management Control System (EMCS). An export declaration must be completed, using the SAD (C88).

You can find more information and historic data references in this document from IFS

If you would like to discover more about customs and excise or have a specific question for our experts, get in touch today!

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