It cuts admistrative costs.
Get rid of the need for a guarantee when setting up a duty deferment account. It's unnecessary and burdensome and adds extra expense which isn’t necessary.
Goods imported from abroad are liable for import duty tax. If you are importing through a large courier company then the courier company will usually pay this on your behalf and then invoice you before delivery. For the privilege of handling the payment for you the courier company will usually add on an administration fee as well of around £15 a consignment – which for a firm like ours accumulated to hundreds of pounds a month.
To get around this administration fee you can open an account with HMRC directly and handle the payments yourself however in order to do so HMRC ask for a guarantee from your bank to ensure they always get paid. Which produces its own set of issues:
- Setting up a guarantee as a small business isn’t easy. Administratively we found it very time consuming and it involved many conversations with our bank because no-one seemed to have the authority to sign off the guarantee.
- You have to be credit checked just as if taking out a loan and whilst the guarantee is in place the bank in effect views it as a loan. Having the guarantee in place therefore reduces the likelihood of being able to take out other banking services as they look at the overall risk over all your accounts.
- Once you have the guarantee set up you are charged an arrangement fee of something like 1.5% annually and a service fee of 0.055% a quarter, by the bank. Therefore reducing the growth prospects of the business.
What is gained here? Out of choice if there’s one account that a firm would always choose to pay it would be HMRC. And if you don’t pay then they have their own enforcement officers in every region of the country who can give you a visit – they’re called the police! This is just another burden on business and unnecessary red tape.