Export compliance critical to ensure cashflow benefits post-Brexit

Despite Brexit coming into effect more than three years ago, the VAT and customs environment is yet to find its new normal. HMRC’s recently issued Customs Declaration Service (CDS) guidance focuses on the challenge of non-departure status encountered by exports processed through Goods Vehicle Movement Service (GVMS) controlled ports. This will potentially impact export VAT zero rating claims.

The automatic or assumed departure status previously granted under the Customs Handling of Import and Export Freight (CHIEF) system for goods bound for the EU, does not apply with CDS. This shift has been identified as the primary reason for non-departure status in most export declarations made via GVMS-controlled ports. 

Under CDS, departure status is no longer assumed, but is instead only assigned to export declarations that have completed the GVMS process.

HMRC has emphasised where the GVMS process is not followed correctly, the export entry or declaration may eventually be invalidated after 150 days. Consequently, these invalidated declarations will not be included in the exporter’s export Management Support System (MSS) reports, as they will be considered as not having departed from Great Britain. Subsequent departure status requests for invalidated declarations will be denied by HMRC, except in cases where the export goods are excise duty suspended.

This will have several knock-on effects for businesses, with one notable challenge arising from the heavy reliance of many exporters on freight forwarders and customs agents to manage export compliance. While the partnership between exporters and agents can streamline processes, it also has inherent risks. 

Overlooking details in some critical entries may jeopardise the exporter’s ability to zero rate exports for VAT purposes, claim excise duty drawbacks (where applicable), and discharge customs duty liabilities resulting from specific customs special procedures. Any oversight or error in completing the GVMS process, may therefore expose exporters to financial and reputational risks.

As with most of the recent post-Brexit customs developments, this highlights HMRC’s continued efforts to intensify its focus on customs compliance, evidenced by stricter consequences and potential penalties for non-compliance. Businesses need to begin to take a more proactive stance, ensuring that their processes are correctly followed in house and by their agents, where applicable.

In essence, exporters are encouraged to implement robust controls to prevent oversights and errors, maintain vigilance over customs procedures, and prioritise compliance to navigate the post-Brexit landscape successfully.