HMRC have invested in resources to increase audit enquiries and increase scrutiny in relation to Senior Accounting Officer (SAO) and approval requests for Authorised Economic Operator and Customs Warehousing. Consequently we consider that there remains a significant unmitigated risk for a large number of businesses when SAOs sign-off in relation to having appropriate customs duty accounting procedures on the basis of having a 3rd party customs broker fulfil their customs obligations.
Our team’s historic experience and recent reviews on Brexit readiness, has highlighted the continued misbelief that, in outsourcing the completion of customs declarations to a 3rd party customs broker, businesses simultaneously outsource tax compliance and more specifically their SAO risk. This is quite a dangerous position to take without having in place the supporting documented processes, procedures and controls to enable review of the data submitted by the 3rd party customs broker and just as importantly the support of an audit trail to prove it.
A further consideration is the newly published Business Risk Review plus (BRR+) guidance from HMRC. One of the low risk indicators listed by HMRC, focuses specifically on “key fiscal areas that are outsourced”. In order to be assessed as low risk, business must be able to demonstrate how outsourced services are effectively monitored and managed.
A recent wake up call
Recently, a business received a routine email enquiry from HMRC relating to a shipment of imported goods. They had been asked to check and confirm the customs data that they had declared for their goods on their import declaration. Unfortunately, the customs broker had made errors leading to a seven figure assessment for customs duty owed over a historic three year period to HMRC. The SAO had relied on the verbal assurance of the inhouse logistics team, who advised the business had appropriate compliance procedures and controls in place. As it transpired, when audited they did not have adequate written procedures, nor did they have a process for regularly checking the data submitted on their behalf and when they did ask for an occasional correction via their 3rd Party Broker, they had no audit trail in place. HMRC is now deciding whether there has been an SAO breach and is keen to pursue penalties.