On the 9th April the UK announced further customs and trade procedures that would apply from 1st January 2021. For many UK businesses these will be significant announcements impacting the way you trade, particularly with the European Union but also impacting trade with the Rest of the World.
In this article we selected one of the most critical announcements that removes the requirement for a bank guarantee for customs special procedures. This is significant as obtaining a bank guarantee can be difficult and cumbersome process, especially for smaller and medium sized businesses that do not have the trading history of larger businesses.
In essence, the process of application for some customs special procedures will be easier, faster and quicker.
The announcement opens up the opportunity for more businesses to use these customs procedures to enhance their trade and supply chain operations from a financial, logistical and operational perspective. The significance of this announcement and the wider benefits it provides should not be overlooked!
However, let’s take a step back and review why bank guarantees are required. The need for a guarantee arises from the potential debt that can arise for future payment of (import) duties and taxes i.e. payment that is deferred under a customs special procedure such as Inward Processing and Warehousing. Guarantees are provided by banks who will want to consider the financial and trading position of the UK business, in some or perhaps most cases banks may require security from the UK business to support issuance of the guarantee.
The announcement does indicate that HMRC will provide 12 months’ notice before reintroducing guarantees, so businesses should act soon in considering the merits of these customs’ special procedures, the opportunity is coming and should become part of your post Brexit planning action plan.
Please see below a summary table for this important announcement.
| Area of Customs | Impacts (from 1st January 2021) | Actions for Businesses |
| Guarantees and Special Procedures | Applications for Customs Authorisations become easier, faster and quicker From 1 January 2021, in most cases businesses will not need a guarantee to cover their customs duty and import VAT to obtain full authorisation for: inward processingoutward processingtemporary admissionauthorised use (or end use)customs warehousing HMRC will give 12 months’ notice before reintroducing guarantees. This is a significant change in that a guarantee is no longer required in the immediate period following 1st January 2021, for the special procedures noted. This could significantly reduce the application time, possibly by up to 120 days as businesses will no longer require to apply for a Customs Comprehensive Guarantee, and no longer require to find a bank guarantor. | Businesses should note that they may be requested to provide a guarantee when they apply or reapply for a special procedure. For example, if records show that in the past the business has: had overdue tax returnsnot paid tax or duties If the business has breached the terms of their special procedure authorisation, HMRC may request a guarantee. |
Kevin Shakespeare
Director of Stakeholder Engagement
The Institute of Export and International Trade