Anna Doherty is Customs Practice director at the Chartered Institute of Export & International Trade.
Traders be aware: HMRC is increasing its focus on customs compliance.
The rise in customs checks we’ve seen in recent years is set to continue - particularly those relating to incorrect duty payments. The release of a free import and export declarations data service for the Customs Declaration Service (CDS) is a double-edged sword.
This new service empowers traders to access their own data but also creates an expectation of watertight compliance, now that traders can use it at no cost. At the same time, the growing power of AI is being used to help government enforcement agencies spot inconsistencies and potential errors in customs declarations, adding to the risks for many firms.
In light of this increase in HMRC activity and rigour, businesses should be asking themselves: “are we entirely confident in the last three years of our customs declarations?”
Review standard
This three-year period is the time HMRC can typically review as part of its standard customs checks.
While businesses may have a general understanding of their customs activity during this time, many lack the detailed evidence required in an audit - especially in cases where declarations are automated or outsourced to an agent.
Documentation and the ability to prove and explain each decision is critical in order to successfully pass a HMRC audit – whether that is a pre-clearance check, preference verification or a full audit of special customs procedures or Authorised Economic Operator (AEO) status.
It is also important that businesses do not assume that a cleared customs entry automatically equates to compliance. Goods may be released following clearance, only for an audit to later reveal misclassification or an invalid preference claim based on the supporting evidence available.
When HMRC checks reveal compliance errors, the consequences can be significant. Potential negative outcomes include reputational damage, significant penalties – such as the £4.7m case against Morrisons for incorrect origin – and the wider business disruption, with day-to-day operations interrupted.
Take a pro-active approach
These impacts can often be mitigated through a proactive approach. Self-auditing, or engaging a third party to support compliance checks, enables traders to identify and correct issues early, before an HMRC intervention forces firms to take action at a potentially more disruptive time.
Where appropriate, businesses may also choose to make a voluntary disclosure to the government, engaging in the type of open and transparent dialogue encouraged by HMRC. This approach can often result in penalties being reduced or even avoided altogether.
Even where a review does not uncover errors, it will deliver value by improving a businesses understanding of its own supply chain and identifying duty mitigation opportunities that result in long‑term savings and operational improvements.
A forward-thinking compliance or supply chain manager can protect their organisation from financial and reputational risk by proactively assessing customs compliance. As HMRC scrutiny increases, traders can turn this challenge into an opportunity by getting ahead of the inevitable checks.
Compliance confidence starts with just five minutes.
Take five minutes to complete your Customs Compliance Needs Assessment. Your responses will be assessed by our customs specialists, who will then suggest a bespoke support package for you.
