As the Brexit transition deadline of 31st December 2020 looms closer and closer, businesses that trade with the UK are preparing to deal with customs in 2021. The first step is to register for customs through Revenue Online Services (ROS) and apply for an Economic Operators Registration and Identification (EORI) number; once this is done, you must decide who is going to fill out customs declaration forms and that they have the data and knowledge needed to complete the job.
The next vital step is to decide how you are going to pay the customs charges. Joe Cleary, Operations & Accounting Unit at Revenue, explains the process: “When goods move through customs, you must make a declaration and make any payments due before the goods can be released to you. The customs can be paid through an account with Revenue, which is kept in credit and from which Revenue takes money when it is due.”
This account is automatically set up when you register for customs; the snag is that you must have the money in the account before the charges need to be paid, as your goods will not be released until Revenue has received payment. This can be difficult for companies dealing with tight cashflow issues.
Deferred Payment Scheme
“Alternatively, you can run up a bill over the course of a month and pay that bill by the 15th day of the following month,” explains Joe. “This is the deferred payment arrangement, and in order to get this, we require a Comprehensive Guarantee, which usually takes the form of a bank guarantee.”
Step One: Apply for a Comprehensive Guarantee with Revenue
Mary Long, Comprehensive Guarantee Unit at Revenue, explains more: “You need to apply for the Comprehensive Guarantee first through the Customs Decisions System (CDS); we run various checks and then give a Letter of Guarantor’s Undertaking to you for your bank. We advise traders to tell their banks that they are applying for the guarantee when they are starting the process, so they can get whatever papers are needed by the bank before they even get the undertaking, as this will minimise any delays.”
The application form for the Comprehensive Guarantee is fairly straightforward, but one important consideration is the amount you need the guarantee to cover, and this will vary according to the volume and type of goods going through customs. “The guarantee should cover two months of goods,” says Mary. “The limit that can be deferred each month is €100,000 so for companies importing a lot of goods, they would need a guarantee of €200,000. If they exceed €100,000 in a month, they must top up by cash at the end of the month. We send out regular statements and it’s a very easy process to top up if business improves and a company suddenly needs to import more than their guarantee covers.
“My advice is to consider carefully the amount you need as a guarantee before applying. You can of course top up with cash or go back to the bank but it could take time to re-apply to the bank for more.”
Step Two: Apply for a credit guarantee from your bank
Once Revenue has carried out a number of compliance checks and approves your application, a Guarantors Undertaking is issued, which can be taken to the bank. Roisin O’Shea, Head of Food & Drink Sector at Bank of Ireland Business Section, explains more: “Our part of the process only really starts when Revenue has approved a business for a Guarantors Undertaking, which outlines the amount of a guarantee needed. We would then ask the client to bring that letter into their bank or to their relationship manager. Essentially it’s a credit application, so would go through a similar process as a loan application. The length of time it would take to approve varies according to the complexity of the business, but [on average] it would take approximately two weeks. The greater the amount, the more complex your business, the longer it could take.”
As this is a credit agreement, some of the information requested by the bank would be similar, such as financial details, accounts and cash flow projections. The bank will also require security; the minimum security required is a Counter Indemnity, which obliges you to reimburse the bank if Revenue calls upon the bank to honour the guarantee – however, you could be asked for additional security. At this stage you will also be advised of the fees.
Once approved, the bank will sign the Guarantors Undertaking and send it back to you, or straight to Revenue, if you specify. “Once you’ve been approved for your Comprehensive Guarantee, you can apply for a customs deferred payment authorisation,” finishes Joe. “This can be applied for through the CDS, and this is very quick, usually just a day or two.”
It’s worth remembering that the Comprehensive Guarantee is needed for many of the authorisations and simplifications that could make your interactions easier with customs, including the UK Land Bridge, which allows goods to travel through the UK to another EU country. “Ask yourself if you need a Comprehensive Guarantee and if you don’t, can you explain clearly why not?” says Roisin. “Certainly the message we’re getting from Revenue is that you need a guarantee for a lot more situations than a lot of people might think.”