What does this mean?
This enables goods to be cleared and delivered without being delayed pending payment. A deferment account is set up with Customs, subject to an agreed maximum limit – usually this is sufficient to cover a full month’s customs duty and import VAT liability. No interest is charged by Customs, so in effect an importer obtains up to six weeks of positive cash flow.
A deferment account is a prerequisite for customs warehousing, which opens much greater opportunities for substantial cash flow benefits, as well as hard savings, and is also extremely useful for administration of duty relief regimes, by extending the point at which customs duty and import VAT becomes payable to its absolute maximum. These benefits cannot be fully exploited without a deferment account.
However, Customs require security, in the form of a guarantee. The guarantee must be sufficient to cover two months of liability, because the limit in month two could be reached before payment is collected from month one. In most cases, guarantees are provided by banks, but are subject to conditions imposed by the banks – in some cases this can mean a restriction on borrowing, or a requirement for a cash deposit equal to the guarantee amount. For many businesses, this restricts working capital, which renders a deferment account unviable.
The Customs Practice can help
There is, however, an alternative. One which provides sufficient security to obtain a deferment account and does not restrict working capital. It is based on a risk assessment and can be attractive to importers who cannot obtain a cost-effective bank guarantee.
So, if you don’t currently have a deferment account, perhaps because the cost of a guarantee has been prohibitive; or if you would like to review your current deferment arrangements, please call us on 01635 521624 or by e-mail to firstname.lastname@example.org.