Customs Duty & Import VAT

When goods are imported into the UK from outside the country, customs duties and import VAT may be payable. The UK's departure from the EU means that imports from the European Union are now treated the same as imports from any other country, requiring customs declarations and payment of applicable duties. Understanding the customs process is essential for importers and exporters.

Import Procedures

All goods imported into the UK must be declared to HMRC through the Customs Declaration Service (CDS). The importer (or their agent) must submit an import declaration providing details of the goods, their value, origin, and commodity code. The declaration can be made at the time of import (pre-lodged) or within a specified period for businesses using simplified procedures. Goods may be held by Border Force until the declaration is accepted and any duty paid.

Customs Value

The customs value of imported goods is the price actually paid or payable for the goods, adjusted for certain elements such as transport costs (to the UK border), insurance, loading and handling charges, and any royalties or licence fees related to the goods. The customs value determines the amount of customs duty payable and also forms the basis for calculating import VAT. Incorrect valuation can lead to underpayment or overpayment of duty.

Commodity Codes

Every product imported into the UK must be classified using a commodity code (HS code) from the UK Global Tariff. The code determines the rate of customs duty applicable. The standard HS code is 10 digits, but may be extended for statistical purposes. Getting the classification right is critical — errors can lead to duty overpaid or penalties for underpayment. HMRC publishes Binding Tariff Information (BTI) decisions as guidance.

Tariff Rates

The UK Global Tariff sets out the duty rates for imported goods. Many goods enter duty-free (0%), while others attract ad valorem rates (percentage of value), specific rates (per unit), or compound rates. Tariff rates vary by product and country of origin. Preferential rates may apply under free trade agreements. The MFN (Most Favoured Nation) rate applies where no preference is available.

Duty Reliefs — IPR and OPR

Inward Processing Relief (IPR) allows goods to be imported without payment of customs duty where they will be processed or repaired and then re-exported. Outward Processing Relief (OPR) allows relief on goods that are exported, processed abroad, and then re-imported — duty is charged only on the value added abroad. Both reliefs require prior authorisation from HMRC and strict record-keeping. Other reliefs include Temporary Admission, End-Use Relief, and relief for returned goods.

Customs Declaration Service

The Customs Declaration Service (CDS) is HMRC's single customs platform, replacing the older CHIEF system. All customs declarations must now be made through CDS. The system handles import and export declarations, inventory management, and duty calculation. Businesses can use direct CDS entry or engage a customs agent or broker to lodge declarations on their behalf.

Customs Agents

Many businesses use customs agents or brokers to handle customs declarations and ensure compliance. Agents can act as direct or indirect representatives. A direct representative acts in the importer's name, while an indirect representative is jointly liable for duty. When choosing an agent, businesses should verify that the agent has CDS access, suitable authorisations, and relevant experience with the type of goods being imported.