Summary of UK Customs record keeping requirements
Customs Traders (Accounts & Records) Regulations 1995 (SI1995/1203)
Types of Customs records that HMRC requires importers (or their agents) to maintain
Reg. 3 (if they exist, the trader must keep)
- An Order
- An Invoice
- A Delivery Note
- A Credit Note
- A Debit Note
- A record relating to an importation or exportation – note this would include copies of declarations (SAD) made on the trader’s behalf, and also duty deferment statements and import VAT certificates (C79); it covers any kind of customs declaration or document
- A Statement of Account
- A record of payment or receipt
- A Journal or Ledger
- Profit and Loss Account, Trading Account, Management Account, Management Report or Balance Sheet
- An internal or external Auditor’s report
- A record relating to any drawback, remission, repayment or reimbursement of, or relief from, (customs) duty – note this includes copies of repayment claims, Bills of Discharge for IP and other specific customs documents.
- A record required, other than under the Regulations, by or under the customs and excise Acts – note for example this includes warehouse deposit, stock and removal records from excise warehouses (alcohol, tobacco, oils)
- A Stock record
- “Any other record maintained for a trading or business purpose”
Records relating to customs declarations (including OP and export declarations) are further called out in Reg. 6, the record “relating to a particular customs declaration” has to be retained in such a way that it is “readily apparent that it does relate to that particular declaration”.
In general, it is always helpful to keep as-complete-as-possible copies of “supporting information” such as emails relating to contracts and so forth, as well. But this is not part of the trader’s record-keeping duty as such.
Standard retention period
For customs duty purposes 4 years (unless the Commissioners have specified a lesser period), and for VAT 6 years
May an importer use its customs broker to maintain records?
The duty is on the importer to maintain the records. This does not necessarily mean that he must himself keep the records. Often companies use 3rd party “archive services” to keep old copies for the required time. This is fine as long as the records can be produced by the trader to HMRC within a reasonable time (not instantly, but certainly within few days max.), if requested by HMRC. In theory, I don’t see why they should not use a customs broker to retain some records – but cautioning that the importer will be held responsible if the records can’t be produced when required – be warned!
Must the records be maintained in country (or can they be retained overseas)?
4 Eyes Ltd knows of companies whose records are stored electronically in another country (e.g. the US). This is fine (subject to permission for electronic storage, if necessary), as long as the records can be “produced”, when required, within a reasonable timeframe.
Can records be retained electronically?
Records may, with some limited and specific exceptions (see s21(4) & (5) Finance Act 1994 (FA1994)), be maintained in “any form” whether written or electronic. In general though, if a record is created (or received) in electronic form it should preserved in that form (not a printout for example) and if it is a written document it should be retained in that form (not a pdf copy for example). But under FA1994 s21(4) the Commissioners may give permission to retain documents “by preservation of the information contained in them by such means as the Commissioners may approve”. In particular, if the trader wants to retain only electronic copies of written documents, he should obtain written permission to do so from HMRC and specify the form in which the documents will be held.
Is information submitted to Customs and applicable agencies confidential/protected from public disclosure?
S18 of the Commissioners for Revenue and Customs Act 2005 (CRCA) makes it clear that HMRC officers must not give (‘disclose’) HMRC information to anyone, unless they have lawful authority to do so. This includes other government departments and their agencies, local authorities, the police or any other public bodies. Disclosing information to persons outside of HMRC is only permitted in the circumstances detailed below:
- For the purposes of HMRC’s functions. An example is where it is necessary to advise a bailiff of a taxpayer’s name and address in order that the bailiff can enforce collection of overdue tax
- Where the person or organisation that the information is about has given their consent. An example could be a taxpayer who provides authorisation for an agent, accountant or other third party to receive confidential information.
- Where the duty of confidentiality is specifically overridden by legislation that permits the disclosure of information to a particular third party. These are often known as ‘legal’ or ‘information’ ‘gateways’.
- Where HMRC receives a court order that is binding on the Crown which instructs HMRC to disclose information.
- Where disclosure is made for the purposes of a prosecution being pursued by HMRC.
- Where disclosure is in the public interest.
- Disclosure to the relevant prosecuting authorities.
- In general, therefore, subject to the above exceptions, yes information given to HMRC is protected from public disclosure.
- The above does not preclude sharing information within HMRC or, probably, with other customs administrations under Mutual Assistance provisions (though the latter may come under blob 3 “legal gateways”).
What are the penalties for recordkeeping violations? How likely is it that Customs will audit?
Fraudulent declarations and dishonest claims for repayment of duty or relief from duty are likely to be (usually are) met with civil evasion penalties. So too will repeated examples of poor record-keeping. Financial penalties are imposed under the Finance Act 2003 s26 (Contravention of a Relevant Rule) The size of the penalty is influenced by the level of co-operation given to investigating officers. Other civil penalties may be imposed under the Customs (Contravention of a Relevant Rule) Regulations 2003 (SI3113/2003), and the Export (Penalty) Regulations 2003 (SI3102/2003). The civil penalties range in a tier-system between £250 (First) and £2,500 (Fifth) but will only start to be charged after at least one warning letter has been issued.
False declarations are also punishable under the Customs and Excise Management Act 1979 (CEMA1979). This gives HMRC powers to seize goods, which won’t be released until a penalty fee is met and the duty or VAT payable is paid in full. In exceptional cases HMRC will pursue sanctions through the criminal Courts.
In exceptional cases, HMRC will apply criminal sanction via the Courts. These would be under, for example CEMA1979 ss167, 168 and 170 (“making untrue declarations”, “counterfeiting documents” and “fraudulent evasion of duty” respectively). The penalty, if proved, would potentially involve forfeiture of the goods, significant financial penalty and/or prison time.
In general, the likelihood of a customs audit is based on the assessment of risk determined by HMRC for each trader. Therefore, the more times the trader gets a “strike” against them (a violation of the rules, e.g. a random physical examination finds discrepancies between the goods declared and the contents), this will increase the risk profile. Country of origin, anti-dumping enforcement on specific products; high revenue at stake, or use of “special” customs regimes such IP or OP are other examples of things that could increase the risk profile of a trader. Broadly, HMRC try to carry out some kind of audit approximately every 3 years or so but in practice a low risk trader might not see an HMRC auditor for 10 years while a “high risk” trader might have an audit once a year.
There is a distinction between “desk audits” which being documentary only do not require an on-site visit, and on-site audits which do. The former are more frequent than the latter, though 4 Eyes Ltd perception is that these tend to be driven by specific issues (e.g. a discrepancy found of values on an import declaration)
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