Insights

MHA helps EU clothing retailer with key customs advice to help UK import declarations

Name: MHA
Price range: $

Andrew Thurston · Posted on: October 4th 2023 · read

Navigating Indirect Tax Challenges: MHA's swift solutions for seamless imports and VAT compliance

Client Case Study

An EU-based retailer had been successfully trading with the UK for many years without having to worry about customs processes. On the 1st January 2021 this all changed.

Background

The retailer, who sells high quality clothing to UK distributors, had agreements in place to sell the goods into the UK under the Delivered Duty Paid (DDP) Incoterm.

The DDP Incoterm has caused significant issues for UK/EU trade as it places all obligations on the movement and customs clearance onto the seller. This, in turn, requires the seller to be declared as the importer on the UK import declaration.

The Challenge

Unfortunately, the EU retailer (or its customs agent) did not realise the full impact of using DDP so all UK import declarations were submitted in the name of the UK buyer. This created a risk to both the buyer (as they are now subject to HMRC Audit activities) and the seller (who has a VAT liability in excess of £500,000 that needs to be addressed). The seller was also in breach of its contractual obligations and could, if the situation was not rectified, lose a multi-million pound sales contract and be subject to legal proceedings by the buyer.

The Solution

Our Indirect Tax Team were employed to review the situation and we quickly identified the issues and formulated an action plan so that the EU retailer could:

Arrange the amendment of the historical import declarations.
Ensure that the agent was correctly applying the DDP so that future imports were accurate.

Under the DDP Incoterm, the EU retailer was making a UK domestic sale and was therefore required to register for UK VAT and charge its UK customers with backdated VAT. MHA quickly managed this situation by registering the EU company for UK VAT and advising on changes to their invoices to reflect the UK VAT whilst incorporating the necessary data required for customs obligations.

As a result of the work completed by MHA, the EU retailer is now correctly importing goods into the UK and fulfilling its contractual and UK VAT obligations.