CUSTOMS INFORMATION PAPER (10) 83

VAT Increase:

Community/common transit guarantees deferment accounts/guarantees

Who should read: /

All Community/common transit (CT) principals, holders of deferment accounts including anyassociated guarantees

What is it about: / The need for traders to immediately increase the level of their customs guarantees and deferment accounts to reflect the change to thestandard VAT rate
When effective: / VAT rate change is effective from 4 January 2011.
Extant until/ Expires / Until further notice.

1. Introduction

In his 2010 Emergency Budget the Chancellor announced an increase in the standard rate of VAT from 17.5 per cent to 20 per cent effective from 4 January 2011.

2. Impact on Community/common transit guarantees

CT principals have a legal obligation to provide a guarantee which is sufficient to cover the full amount of duties and other charges (including VAT) on the goods carried under the CT procedure. The CT guarantee is calculated based on the highest rates of duties and other charges applicable in the MemberState of departure. Principals who expect to use the CT procedure on or after 4th January 2011 will need to ensure that their guarantee amounts are set at a sufficient level to cover the increased VAT rate.

3. Action to be taken by CT principals

a) Comprehensive guarantees and guarantee waivers (Guarantee types 0 & 1)(existing authorisations)

Current holders of comprehensive guarantees and guarantee waivers are reminded that it is a condition of your authorisation to ensure that the total amount of duties and other charges at stake on ‘open’ CT movements does not exceed the guarantee reference amount.

Comprehensive guarantee and guarantee waiver holders are therefore advised to consider immediately whether your guarantee reference amount will be affected by this change and, if so, to contact theUK’s transit guarantee office at the address below to arrange for your guarantee to be amended. Failure to do so may result in your goods not being released for transit if the existing reference amount is insufficient to cover the full amount of the debt including the VAT at the increased rate.

To request an amendment to your comprehensive guarantee or guarantee waiver, write to the guarantee office at the following address, stating the revised reference amount:

HM Revenue and Customs,

National Simplifications Team,

Central Community Transit Office,

Custom House,

Main Road,

Harwich,

Essex

CO12 3PG

E-mail:

b) Comprehensive guarantees and guarantee waivers (new applications)

Principals who wish to apply for authorisation to use a comprehensive guarantee or guarantee waiver will need to ensure that the information provided on the C1343 application form for calculating the reference amount takes account of the increased VAT rate for any goods to be moved on or after 4thJanuary 2011.

c) Individual guarantees (type 2) and cash deposits (type 3)

CT principals who intend to move goods under these types of guarantee will need to ensure that the guarantee amount is sufficient to cover the full amount of duty and other charges at stake including the increased VAT rate. This applies to all goods moved on or after 4th January 2011, even if the individual guarantee or cash deposit is lodged with customs prior to that date.

d) Individual guarantee vouchers (type 4)

Principals using guarantee vouchers to move goods on or after 4th January 2011 must lodge enough vouchers (in multiples of €7000) to cover the full amount of duty and other charges at stake including the increased VAT rate.

4. Impact on holders of Deferment Accounts/Guarantees

Current holders of Deferment Accounts and or Guarantees are reminded that it is the holders responsibility to ensure that the total amount of VAT, duties, and other charges do not exceed their Deferment/Guarantee limit. You should ensure that your limits are high enough to take account of the VAT rate rise taking effect from the 04 January 2011, if changes are required contact your guarantee provider or the Central Deferment Office (CDO) at the following address:

HM Revenue & Customs
Banking Operations
Central Deferment Office
6th Floor North West
Alexander House
21 Victoria Avenue
Southend-on-Sea
Essex
SS99 1AA

Phone: 01702 36 7425/7429/7431/7450

Fax: 01702 366091

Note: The Central Deferment Office phone enquiry lines are open Monday to Friday 09:00 – 12:30 and 13:30 – 16:30.

Information on setting up or changing an existing Deferment Account and/or Guarantee can be found in Public Notice 101.

5. Simplified Import VAT Accounting (SIVA)

Simplified Import VAT Accounting (SIVA) is a scheme that allows you to reduce the level of financial guarantee required to operate a duty deferment account for VAT purposes.

The objective of this scheme is to provide compliance cost savings for legitimate businesses by reducing the level of financial security required to guarantee the payments of import VAT.

Specifically, authorised traders will be able to apply to reduce the level of financial guarantee required to operate a duty deferment account for VAT purposes only. This may mean that the cost of having a guarantee will be reduced.

To qualify you must:

-be the holder of a live Deferment Account or intend to apply for one, and

-meet all the requirements set out in the approval criteria

For full details of the approval criteria and application process please see Public Notice SIVA 1

Issued on the 9 December 2010 by the JCCC SecretaryHMRC, Excise, Customs Stamps & Money Directorate.

If you have a question about the content of this paper please use the details provided in the Contacts section. For general HMRC queries speak to the Customs Helpline on Tel 0845 010 9000.

For comprehensive guidance on international trade regulation, as well as advice on market information and business growth visit the Business Link website.