How accountants are managing complex customs requirements for clients

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Confusing customs procedures are causing a headache for the accountants supporting and guiding small business clients. Here’s the action they’re taking.

There’s no doubt that Brexit has created a myriad challenges for businesses involved in the export and import of goods with EU countries: navigating different VAT rates for each EU country, registering for EORI numbers, understanding rules of origin and getting to grips with new customs processes.

But now research by the Federation of Small Businesses (FSB) has warned that customs paperwork is hampering a significant number of small businesses that are trading overseas.

Four in ten firms said they struggle to navigate customs procedures due to the complexity involved and lack of expertise and are having to work with expensive intermediaries instead.

Tina McKenzie, FSB Policy Chair warned that as small firms are ‘less likely’ to have the resources needed to deal with customs procedures, many are dependant on intermediaries. Small firms are often ‘unable to commit’ to large volumes and ‘less able’ to secure fixed price agreements or negotiate with couriers – leaving them at a significant disadvantage financially.

Key issues small firms are having to nagivate include:

  • Switching to Customs Declaration Service (CDS) for import declarations (which became mandatory from October 2022).
  • Preparing to switch to CDS for export declarations (mandatory from December 2023).
  • Investing in new systems which comply with new EU-UK customs rules.
  • Understanding terms of sale.
  • Obtaining the correct commodity code for goods.
  • Appointing an EU representative.
  • Registering for an EORI number.
  • Making sense of customs declarations.

All this is having a considerable impact on businesses involved with overseas trading – from both a financial and resources perspective. We spoke to accountants who work closely with businesses involved in overseas trading to find out what exactly the issues are with customs paperwork and how they are supporting these businesses.

We have internal teams navigating customs requirements

Steven Harcourt, Director, Prime Accountants Group

As an accountancy firm, we’re helping clients by:

  • Advising on the necessary customs requirements and how they impact clients’ businesses.
  • Discussing possibility of using intermediary and how to pass on additional costs by using a cost analysis model.
  • Providing support with internal changes enabling internal teams to navigate customs paperwork and requirements.
  • Advising clients on the capabilities of their existing software and if new software is needed.

Our clients are mainly owner-managed SMEs with limited in-house admin or finance resource.  Therefore, any additional customs paperwork becomes a burden. Such clients have had to utilise freight forwarding companies – and therefore their fees – to complete the paperwork required when exporting goods from the UK. 

A client who exported lighting systems and electrical products pre-Brexit has decided to stop trading overseas due to complexitites and associated costs. Another told me their sales of goods to EU businesses has plummeted since Brexit.

There is also fear from European buyers due to the added risks of goods getting stuck in customs if paperwork is not correctly completed or submitted. Buyers also have to make an additional duty payment in order to receive goods from a UK business. Therefore, many buyers are choosing not to trade with UK businesses.

Another client is looking at the option of ‘drop shipping’ goods between EU countries and raising the paperwork in the UK: this limits the risk of inefficient import and exports. However, the paperwork requirement is not straightforward.

Clients who have opted to use intermediaries have had to pass these costs on to their end customers.  Any reduction to the product margin is a great challenge to the business owners and hampers business growth or reinvestment.

Verdict: European buyers are put off trading with UK businesses, while costs are rising and being passed onto customers. We’ve introduced a slate of changes to address the issues.

I’m offering a service where I take care of paperwork

Ashley Ritchie, FCA, Founder, Campbell Ritchie Chartered Accountants

A few of my clients have stopped trading outside the country due issues around customs. The extra paperwork filled them with fear and dread. In my opinion, they could have grown their business if they’d stuck with it but they felt it wasn’t worth the extra admin. Even something as simple as obtaining an EORI number seems to panic some business owners.

I myself offer a service to clients where I’ll take care of the paperwork for them: I can apply for an EORI number on their behalf or act as their intermediary for IOSS. I am also set up as an agent

with both HMRC and the Irish Revenue which makes a massive difference for clients..

Going forward, I’m hoping the new Windsor Framework will also help clients. This will allow the export of more items with less paperwork involved. Small businesses (especially in Northern Ireland) are the backbone of our economy and need to be supported more.

Verdict: Many clients have stopped overseas trading due to customs complexities, restricting growth. Offering a service where I do their paperwork for them has helped.

We’re guiding small clients through outsourcing to customs agents

Paul Samrah, Partner, Moore Kingston-Smith

While clients continue to struggle with navigating new regulations, Brexit has been in place for nearly four years now, so businesses are far more accustomed to the paperwork, time delays and additional costs involved.

Common pitfalls with customs declarations are:

  • Misclassification of information.
  • Misunderstanding the rules of origin.
  • Using incorrect Incoterms (the international trade rules defining buyer and seller responsibilities, and obligations when it comes to delivery, transportation and insurance).

Making mistakes leads to delays, and time is money.

While using a customs agent means extra cost, it does mean that complex paperwork is completed correctly, saving time in the long run. Whether you pass on part or all of the costs incurred to customers is entirely a commercial decision, but you don’t want to upset them, and their business is vital.

Our role as accountants is to act as a sounding board for clients and guide them through challenges. For the smaller businesses that must outsource, it’s about handling various aspects of customs declarations. We also signpost credible customs agents, freight forwarders and tariff experts where necessary.

Verdict: We’re helping businesses by guiding clients through using a customs agent.

Annie Makoff is a freelance journalist and editor.

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