Importers of high-value goods from the United Kingdom, such as art, precious stones and metals, antiques, gold, vintage automobiles, and wine collections, can benefit from freeport warehouses. This is because Freeport warehouses allow for lower customs taxes than non-freeport warehouses. We demonstrate how importers in the United Kingdom may take advantage of possibilities.
Only after the commodities are released into the domestic market, maybe after processing, is customs tax due. By decreasing import duties and providing a quicker customs process, freeports have the ability to enhance and rejuvenate regions around the United Kingdom.
New Freeport model in the United Kingdom
For port operators and enterprises, the UK government model involves various customs zones located within or adjacent to a port.
The advantages of being able to lawfully import raw materials and components and then export completed items with little or no tax and few rules are self-evident.
- Tariffs, import VAT, and excise will not be due on imports until they leave the Freeport and reach the UK’s domestic market.
- Importing components duty-free and then manufacturing the complete product in the Freeport will allow for duty to be paid at the more favourable rate for finished products when the product enters the UK market. This is known as duty inversion.
- Duty exemption for re-exports — this applies when components are imported duty-free, the final product is made in the Freeport, and then the finished product is exported.
- Customs processes have been simplified and streamlined.
Importers receive tax advantages
Importers from the United Kingdom who pass the HMRC’s “fit and proper” test will be encouraged to build, grow, and invest in UK Freeport warehouses. Importers from all around the UK will benefit from tax breaks such as:
- Discounts on business rates
- Relief from stamp duty and land tax
- Contributions to national insurance and R&D tax credits
- VAT and Excise Duties solutions for products handled within the Freeport warehouses; and
- Capital allowance has been increased.
Advantages of Freeports
When tariffs on components are higher than on the final product, freeports are frequently regarded to be advantageous. It is feasible, for example, to import components duty-free, produce the complete product in the Freeport, and then, when a product reaches the UK domestic market, it must pay duty at the rate applicable to the final product.
Importers can benefit from the fact that intermediary items imported into a Freeport are not subject to tariffs. When a finished item leaves the Freeport zone warehouses, the tariff is due. Freeports are an effective weapon for combatting tariff inversion since items may be lawfully exchanged within the freeport zones without leaving the warehouses, allowing their owners to make enormous profits.
Fit and proper examination for import license
The UK importer will require a license to import into a Freeport warehouse. Persons who do not pass the fit-and-proper-person test and HMRC clearance will not be awarded licenses, which are designed to prevent money laundering, illicit trading of products, and shady individuals from entering UK Freeport warehouses.
If you’re concerned that you won’t pass the fit and proper person test, we can help you communicate with HMRC in a productive way. There are a few options to examine. We can have the case reviewed by an impartial statutory body. You can also go to the Tax Tribunal to have HMRC’s judgment overturned on your behalf.
What is the Fit and Proper test and how does it work?
HMRC will examine the following factors when determining whether or not a person is a “fit and proper person”:
- if the applicant has a history of breaking tax or customs rules that HMRC considers severe and that is relevant to the applicant’s eligibility for positions of trust or control over finances and tax matters Unspent convictions for dishonesty, fraud, financial or tax crime, as well as other offences, are clear instances HMRC may depend on.
- An applicant’s 20-year compliance record and track record of success. Fraud or suspicion of fraud allows HMRC to go deeper.
- if any previous violation qualifies as a “serious breach” HMRC will consider the following factors in particular:
- significance – particularly in cross-border trade, with a focus on Customs, VAT, and Excise requirements;
- a purposeful breach will be deemed more severe, especially if the non-compliance was hidden from HMRC or was proven to be fraudulent;
- Fraud and other forms of criminal non-compliance will be dealt with more severely than other sorts of non-compliance;
- repeated non-compliance will be deemed more serious than single occurrences of non-compliance;
- continuing non-compliance – if the applicant is the subject of or is connected to a current or previous inquiry into non-compliance;
HMRC will also consider if the applicant has ties to other firms that have failed the fit and proper test. Between applicants and HMRC, establishing a sufficient link is frequently a point of contention.
Raw materials with a high asset value
Businesses involved in a variety of high-value asset markets, including precious metals, scrap metals, and precious metal importers, will have a choice. They can continue to import without a license, but tax benefits will be lost. Alternatively, the importer can apply for a license and benefit from a variety of tax benefits. It’s almost a no-brainer.
Gannon’s experience
We come in to help firms with a difficult tax history or set-up, as well as those who think they have been unjustly handled by HMRC despite satisfying all of the fit and proper test standards, both in law and in practice.
