How to Survive a Customs Audit

There is no doubt that HMRC customs audits are on the up.  With a 30 % increase in 2022 and a noticeable uplift so far this year, there’s no time like the present to prepare for the inevitable, but it can be hard to know where to start and what to expect when the time comes.

Why me?

Businesses are normally selected for audit randomly, although the following factors may increase the chance of selection:

• the business has a higher risk score because of historic compliance records; or
• specific industry, company or peer group intelligence is identified.

Customs audits can cover documentation only and are sometimes done over the phone.  However, customs representatives often come to inspect business premises and occasionally customs audits/visits are unannounced.

What to Expect

When the audit starts, the auditors explain what they need.  They may want to:

• inspect goods and documents relating to customs and international trade;
• view information about goods or services in the international supply chain;
• check compliance of any customs related approval, authorisation, registration, or licence held or applied for;
• carry out visits for another government department, where the licence relates to the import or export of goods.

The information auditors may ask for includes company’s charter, powers of attorney, accounts, returns, bank records, import and export paperwork, contracts, goods specifications, import and export licenses and certificates and other business documents.

Best Practice

It is best practice to be able to demonstrate sound customs processes and procedures, including those for customs special procedures, accurate customs records (invoices, import and export declarations, transport documentation, bills of discharge, etc.), clear instructions for intermediaries, evidence of customs controls and checks, customs knowledge and technical understanding.

The Risks

Customs non-compliance does not only bear economic risks to businesses but may also result in penalties if customs law has been broken. This includes, but is not limited to, infringements of customs regulations, failure to comply with any customs-related approval, authorisation, registration or licence, mis-declarations, failure to comply with a customs procedure, failure to produce information, failure to keep records, inaccurate returns or documents and unauthorised removal of goods from customs supervision.

Ultimate Responsibility 

The Senior Accounting Officer will bear ultimate responsibility for companies with a turnover of over £200 million.  Read more on Senior Accounting Officer responsibilities.