RECOVERING UK EXCISE DUTY PAID ON GOODS DAMAGED OR RETURNED

June 23, 2022

Occasionally excisable product imported for sale to the UK market arrives damaged or the UK customer may refuse delivery. If goods have been imported and the excise duty paid, the importer potentially suffers financial loss unless the duty is recoverable.

UK importers need to ensure that they understand the rules and costs of repayment claims for damaged and returned goods, including documentation detailing the goods which are:

• To be re-exported or destroyed, or

• Damaged prior to arrival.

UK excise duty is reclaimable from HMRC where product is:

1. Re-exported from the UK, or

2. Defective, damaged or lost beyond recovery.

There are 2 separate claims processes:

• Duty Drawback (Drawback)

• Repayment

Drawback can be used where the goods are to be re-exported from the UK, or where the quality of the goods is “unsatisfactory” (specifically due to faulty manufacture, deterioration, or contamination).

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Drawback is not available for goods destroyed in transit (accidental destruction). HMRC take the view that this eventuality should be covered by insurance against normal risks.

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For Drawback purposes the claimant is always the “duty payer” (usually the importer).

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Alternatively to the Drawback procedure, it may be possible to submit a claim for Repayment of duty where the goods are:

• Defective

• Not in accordance with the contract, or

• Damaged before customs clearance.

All the above grounds could in principle apply to goods found to be “lost” when the goods arrive at a UK distribution hub.

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The Drawback procedure should always be used where the goods are being re-exported or destroyed. However the process is not suitable for small (parcel level) consignments, because there are strict conditions which must be adhered to, it is quite complicated and requires detailed paperwork.

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For Drawback there is a “minimum claim” amount of £500, although a lower minimum may apply in specific circumstances. Drawback claims must be submitted within 3 years of importation.

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Repayment claims can be submitted for any amount greater than £10. This process is of use to importers mainly when the goods have been damaged in transit (e.g. bottles broken). The essential condition is that the damage occurs “before customs clearance”. If shipping consolidated loads for breakdown and onward distribution, repayment claims can in principle be made for any damage found to have occurred before arrival at the distribution centre, but not after.

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Our UK partner works with importers and their logistics providers to design suitable processes and documentation to allow Drawback and Repayment claims to be made, and to understand the costs (time as well as money) involved in making claims. We believe that this is a critical issue for importers in a post-Brexit world (especially online sellers) where margins are being squeezed.