In each case (UK and RoI), there are both administrative penalties i.e. on the spot fines and criminal offences for breaches of customs obligations. Directors and persons involved in the company at a level of instrumentality who cause the company to do the relevant breach can be prosecuted individually, fined or even imprisoned.
On both the Irish Revenue and UK HMRC side, there is the possibility of enforcement on the ground at the border, at premises and/or in an audit. Officers of the customs have policing powers in relation to customs which are more like those of the UK Police/ PSNI and Gardai, than in the case of other taxes. They have stop and search powers. They may search for computer and electronic records They may search premises.
The goods can be forfeited for breach of customs law in a very swinging way. There are procedures for appeal but ultimately this could be an extra cost of non-compliance.
As in other tax areas, customs audits are notorious and if traders have made an error in customs returns, they can be hit with a charge for arrears and even penalties and interest in the event of the matter emerging in an audit.
Issues of classification and valuation are central to and are open to challenge in an audit. Issues around revenue/payment obligations in the UK and the Republic of Ireland will be the ones to which Revenue or HMRC will be most attentive if there are duties.
Of course, traders it might be expected the Revenue and HMRC would be “light touch” at least at first, and not to be harsh in the event of genuine mistakes as opposed to deliberate reckless or careless actions.
There are obligations to retain evidence of transactions and supporting documents for a period of up to 4 to 6 years. Unless traders retain paper files, they need some mechanism of scanning basic documentation having access to it through the providers and retaining supporting documents such as commercial invoices and any compliance requirements in the case of goods subject to authorisation licensing. The data would need to be associated with the customer, case, and order electronically.
A customs audit is the examination of accounts and other business records. It verifies the compliance of the business with the relevant legislation and Revenue requirements. The electronic declaration facilitates importers and exporters by relieving them of lodging documents to a customs station.
Revenue assumes that all customs declarations submitted contain the correct information. As misdeclarations are possible, it is necessary to validate a selection of declarations by audit to confirm compliance. If trader’s trading activities include imports, exports or both, to or from a non European Union (EU) country traders may be subject to a customs audit.
Traders will be given at least three weeks’ notice in writing of our intention to carry out an audit. We will also send traders details of the following:
- Name of the officials who will carry out the audit.
- Date and time of the audit.
- Trading period to be audited.
The auditor will provide traders with an initial list of custom declaration (SAD) numbers within the trading period to be audited. Traders must have all supporting documents for these customs declarations. Traders must also allow Revenue staff to inspect trader’s:
- business premises
- commercial records whether electronic or not
- manufacturing process (where applicable)
- certain items of trader’s plant or stock.
The following should also be made available to the auditor:
- Sales and purchase orders, invoices and delivery notes.
- Sales and purchase ledgers.
- Stock records.
- Import and export licenses.
- Import and export approvals.
During the audit
An audit generally involves the following:
- On arrival, the auditors will identify themselves and let traders know how long the audit will last. The audit will generally last no more than one week.
- The auditors will ask traders questions about trader’s book-keeping and how trader’s business operates.
- The auditors will examine trader’s books and records, to validate trader’s records against customs declarations.
- If adjustments are required, these will be discussed with traders and traders will also be notified in writing.
- If discrepancies are identified in trader’s control systems, the auditor will outline the issues and discuss proposals to correct them.
The auditor may request any documentation relating to trader’s customs declarations made in the preceding three years. However, an auditor usually selects an audit period of between three and six months within that time. The audit may highlight discrepancies. In this case the auditor may increase the scope of the audit to include further declarations either side of this period.
If traders owe money as a result of the audit, traders have ten days from the date of issue of the written notification to pay. Interest may also be applied on any customs debt established in a post clearance audit.
Traders should explain trader’s position to the auditor. Traders have the right to be heard (right of reply) before an adverse decision is taken in relation to the payment of Customs Duty. If disagreement still exists traders have the right to appeal the decision.