If you are buying Christmas gifts online this year, take care that you are not presented with unexpected VAT, excise duty or customs duty charges before you can take possession of your purchases. HMRC is urging shoppers to consider certain custom’s issues before they start browsing to buy gifts online. Otherwise, they may be hit with unexpected customs charges and end up over budget this holiday season.

Changes introduced on 1 January 2021 mean that in the same way that consumers have previously had to pay charges when buying certain items from non-EU sellers, they may now also need to do so when buying goods from the EU.

HMRC recommends you consider seven key areas to determine whether there will be charges on their goods. If there are charges to pay, shoppers are being warned that they may also need to pay a ‘handling fee’ to the courier company before their goods are released.

1: Be aware of where you, the recipient, are based

Shoppers based in Northern Ireland won’t be affected by these changes due to the Northern Ireland Protocol, however those in Great Britain should be prepared for potential changes.

2: Check if your order contains goods subject to excise duties, such as tobacco, alcohol or perfume

Unlike other items, there is no lower threshold for customs charges when it comes to excise goods, so there will be charges due no matter the value or origin of your goods.

Shoppers buying excise goods will need to pay import VAT and excise duty and may also need to pay customs duty (be mindful of the Bonus Tip below).

3: Check if your order is worth more than £135, before extra costs, such as shipping, and insurance are applied

Shoppers buying stocking fillers or small value items, not including excise goods, don’t need to worry as goods sent in consignments worth less than £135 should not attract additional charges, as UK VAT is collected by the seller on behalf of HMRC at the point of sale. This will also apply to goods being purchased from non-EU countries.

Anyone buying a more expensive product from abroad – over £135 – will now need to pay import VAT and may need to pay customs duty. The amount due will depend on a range of factors, including shipping and insurance costs so, to avoid surprises, consumers should consult their seller.

Shoppers who already know they will need to pay import VAT should make sure their seller does not charge them VAT, otherwise they may be charged twice. See Top Tip 5.

4: Remember there are new charges if you’re sending presents overseas – or if someone abroad sends gifts to you

If you’re lucky enough to receive a gift from someone based in the EU and it is valued at less than £39 and it does not contain excise goods, it will be exempt from import VAT and customs duty. Above the £39 threshold, import VAT will be due and once the value of the gift reaches £135, customs duty will also be payable. You could also be charged a “handling fee” – see Top Tip 5

If you are planning on sending a gift to someone based overseas, you should check guidance published by the relevant customs authority to check their specific rules and charges.

5: Be aware of how and when you could be notified of charges

Anyone needing to pay customs charges will be contacted by the courier company and asked to pay the charges before they can receive their goods. Alternatively, the seller may arrange to pay any charges upfront on your behalf, but you should check with the seller to avoid any unwelcome surprises.

6: Check the guidance available to you

To help shoppers navigate these changes, HMRC has produced diagrams outlining 3 fictional scenarios about buying goods from the EU and has published a simple guide on GOV.UK, which also contains essential information on how to dispute a charge, return unwanted goods and to get a refund on the charges paid.

Bonus Tip: Check with the seller whether the goods originated in the EU and whether they qualify for a zero tariff

Customs duty won’t be due on goods if they meet criteria set out in the EU-UK Trade and Cooperation Agreement and a zero tariff can be correctly applied.

The Rules of Origin requirements mean that even if your parcel is valued above £135, if the goods you are buying originate in – or have been sufficiently worked or processed within – the EU, the seller confirms this and the zero tariff is claimed on the customs declaration, you will not need to pay any customs duties although import VAT will still be due.

If customs duty is due, the rate – or the tariff – for each item can be found within the trade tariff tool but it’s recommended you check with your seller to find out exactly what you will owe.

HMRC have issued a press release that sets out the scale of criminal activity, convincing taxpayers to part with bank or personal details under threat of arrest or court action.

The scale of these self-assessment scams is staggering, apparently over 800,000 tax-related scams were reported to HMRC is the past year.

Why is this activity increasing now?

Self-assessment tax returns for 2020-21 have to be filed electronically by the 31 January 2022. This provides an excuse for scammers to up their game, as taxpayers would expect more communication from HMRC in this period.

And some of the emails you receive on tax matters will be from HMRC.

How to tell genuine from bogus communications

HMRC have issued the following advice:

“More than 4 million emails and SMS will be issued this week to Self-Assessment taxpayers pointing them to guidance and support, prompting them to think about how they intend to pay their tax bill, and to seek support if they are unable to pay in full by 31 January.

“However, the department is also warning taxpayers not to be taken in by malicious emails, phone calls or texts, thinking that these are genuine HMRC communications referring to their Self-Assessment tax return.”

HMRC’s Director General for Customer Services continues:

“Never let yourself be rushed. If someone contacts you saying they’re from HMRC, wanting you to urgently transfer money or give personal information, be on your guard.

HMRC will also never ring up threatening arrest. Only criminals do that.

Scams come in many forms. Some threaten immediate arrest for tax evasion, others offer a tax rebate. Contacts like these should set alarm bells ringing, so if you are in any doubt whether the email, phone call or text is genuine, you can check the ‘HMRC scams’ advice on GOV.UK and find out how to report them to us.”

There are even bogus websites that look just like HMRC’s webpages, where you are encouraged to submit your outstanding tax return.

If in doubt

If you do receive a phone call, email, or text purporting to be from HMRC, either threatening arrest, court action, promising a rebate, or some other urgent matter; before continuing with a conversation or replying to an email or text, end the call, do not reply to text or email and instead, contact HMRC directly using the contact numbers on the GOV.UK website, or login to your HMRC personal tax account.

And if you have a tax adviser, call them.

Take your time

It is very unlikely that HMRC staff would contact you demanding money or information without first sending out reminders. Before you reply, check that the communication you have received is from HMRC.

Unless you are committed to dying with your boots on, there will come a day when you desire to exit from your business and retire or try something different.

The way that you organise your business, and in particular, the way you organise your finances, will have an impact on the value (£’s) you can expect to receive when you hand over the keys.

Who will you sell your business to?

There are a number of options. For example:

• Hand over the business to a family member.
• Sell the business to a competitor.
• Sell the business to your management team.

What factors will increase the value of your business?

A key item that a potential outside buyer will be interested is your customer list. Do you have a number of regular, high value customers, or are you reliant on one or two key customer relationships? If the latter, this will tend to devalue goodwill as the loss of one or more of these high-value customers may have a serious impact on the buyer’s ability to maintain profitability.

Another issue that would help a buyer achieve a success transition is if you are willing to stay on, after your sale is completed, and support the transition process for a fixed period.

Building a competent team, and the systems to run your business effectively, will also add value to the selling price of your business.

Planning is critical

Business exit planning should be close behind business building activity. It can and should be planned for…

And the planning process is not a one-off affair. It is something you should review on an annual basis. In this way you can build your business with a clear end goal in view and make decisions that will not only maximise returns while you are in charge, but also increase the value of your business to an eventual buyer.

If you would like to discuss your business exit options, we can help.

If you are importing goods into the UK for the first time you may be advised to seek the assistance of a qualified customs agent. The process of creating and filing the correct documentation, such that the goods can pass through border controls with no hold-ups, and any duties or import VAT are paid, is not a process for the faint-hearted.

For example, a Duty Deferment Account (DDA) is the main payment method for customs and excise duty. It can also be used to pay import VAT. Having a DDA lets you defer payments for customs duty, excise duty and import VAT. It also lets you make monthly payments to HMRC through Direct Debit, instead of paying for individual consignments immediately at import, or when released from a duty suspensive procedure such as customs warehousing or excise warehousing. If payments are above £20million this will need to be paid by CHAPS.

If you import non-controlled goods into Great Britain from the EU and use delayed declarations, you will need to have access to a DDA when submitting your first supplementary declarations. You will have 175 days to attain a DDA and submit a full declaration from the day the goods arrive in GB.

Either you or your agent must also be authorised to use Simplified Customs Declarations Processes and have a DDA.

In order to successfully obtain an account, you must meet certain authorisation criteria. Once your application is successful you will be sent a Deferment Approval Number (DAN). The DAN used for declarations must always be quoted on all declarations.

All account holders must continuously satisfy the authorisation criteria in place, even after the application is successful. When making an application, you will need to provide information about your business such as an EORI number, Business Address associated with your EORI number, correspondence address; and you might require your VAT number (VAT numbers are usually not required for DDA).

Moving goods across the UK’s borders in either direction requires compliance with a whole raft of red tape. Unless you have the tenacity and time to burrow into the various customs clearance and duty/VAT payments processes, we again suggest that you consider the services of an experienced customs agent to take care of these chores for you.

ULEV expands to Ultra Low Emission Vehicles. It is an acronym that we will see on a more frequent basis as climate issues climb in importance.

Most families have cars, some use commercial vehicles. The majority are presently fuelled by petrol or diesel.

As manufacturers commit investment to the development of carbon-free transport options, primarily the use of electric powered units, these same families will be faced with ever-rising incentives to ditch their petrol or diesel vehicles and join consumers encouraged to buy electric.

Government seems committed to this change in its attempt to achieve a carbon net-zero economy by 2030.

A few of the present incentives to buy electric are set out below:

• Electricity is not considered to be a combustible fuel, and therefore fuel duty would not be added to electricity consumed to power electric vehicles.
• VAT added to present road fuels is 20%. Electricity used to charge a car at home would incur a 5% VAT charge.
• Zero or low CO2 rated electric vehicles will incur a much lower benefit in kind charge than petrol/diesel alternatives.
• As electricity is not a fuel, the car and van fuel benefit charges – for private use fuel provided by employers – will not apply. However, it can apply to plug-in hybrid cars.
• Electric company cars may attract higher capital allowances.
• Plug-in grants are available for the purchase of qualifying cars and commercial vehicles. These grants are administered by the vehicle dealerships.

Price continues to be a brake on a rapid uptake to ULEVs, but as demand increases, new developments in the technology of low-carbon transport will evolve and prices will fall.

Other challenges, a dearth of charging points and journey ranges between recharges, are gradually being addressed.

The future of transport seems to be electric or other “clean” fuel alternatives. We may be fast approaching the day when diesel and petrol pumps are solitary features in the coming ULEV charging and refuelling stations.