Import compliance in the UK is rising in importance, as the government looks to ‘close the tax gap’ and enforce post-Brexit trade regulations. HMRC has also said it wants to ‘modernise’ its tax system for businesses in order to make compliance easier, as seen with the publication of its ‘Transformation Roadmap’ in July 2025.
While these plans largely involve efforts to remove cumbersome paperwork requirements through digitalisation, there has also been a recruitment drive to hire more officials to enforce compliance with new rules for trade with the EU. This follows a period of relative leniency in the years immediately following Brexit, in which businesses were given time to acclimatise to new customs requirements.
This period is coming to an end now though, with HMRC’s annual reports and accounts for 2024-25 showing the department sought to hire 5,500 new officials last year in a bid to better enforce tax compliance.
It should be remembered, after all, that although import taxes and rules are partly designed to protect the domestic market from becoming a dumping ground for lower standard imports, they are also a form of income generation for the government. Businesses should also be under no illusion that officials will perceive deliberate duty underpayments as effectively being a form of fraud.
Mistakes happen
When delivering advisory services to importers for the Chartered Institute, I’m often asked questions about avoiding duty underpayments. Most of the time, underpayments are a result of mistakes made while using the Customs Declaration Service (CDS), a result of an incorrect valuation or classification for the goods being imported, or a business has claimed a preferential tariff without having the correct evidence in place to prove that the goods meet the required rules of origin.
And, generally speaking, customs duty mistakes are just that – honest mistakes. After all, businesses that are deliberately and repeatedly undervaluing their imports are hardly likely to come to the Chartered Institute for advice. Such organisations are, in effect, smuggling and committing a crime. These companies can be fined or issued more severe penalties, potentially up to being banned from cross border trade or even imprisonment of senior employees.
Businesses usually don’t realise they’ve made a mistake until they’re undergoing an audit or preparing for one. Often, when we’re reviewing a company’s customs compliance processes or application of special procedures, through a health check or other advisory service that we provide, we’ll spot underpayments.
HMRC is supportive of honest companies that realise they’ve made mistakes and show a willingness to rectify this. Indeed, businesses can always make an HMRC duty underpayment disclosure through an online C2001 form.
So, most companies we talk to are usually just making mistakes and needing support to correct this, or they are keen to improve their imports compliance procedures to avoid making possible CDS duty errors in the future.
Avoiding duty underpayments
How can you avoid duty underpayments in the first place then? There are three things businesses can do.
Firstly, make sure you understand the three pillars of customs compliance – classification, valuation and origin. Calculating the correct duty rate requires you to:
- Use the correct commodity code for your goods (i.e. the classification)
- Understand how to calculate an accurate customs valuation for your goods
- Declare the right economic origin of your goods – noting that this isn’t necessarily the same as the geographic location your goods come from
You can read more about these three compliance pillars in our free guide here.
Secondly, use online tools to monitor your duty liabilities.
Mistakes often happen when staff overseeing supply chain operations or customs procedures are working on a large number of goods movements at any given time. In such scenarios, it can become difficult to see the wood through the trees. CDS duty errors become apparent only sometime after the declarations have been cleared and as an HMRC audit approaches.
Businesses should ensure they have access to the data that has been submitted in their name into CDS by their customs intermediaries. This previously chargeable service is now available through HMRC’s relatively new free of charge ‘Get customs data for import and export declarations’ dashboard and the government has provided guidance on how to use this here. You can also speak with us at the Chartered Institute to understand the wider compliance benefits of having access to this information.
With this data, tools like MyCustomsInfo help businesses to proactively identify duty over or underpayments quickly, reducing the risk of errors slipping past the human eye, as they often tend to do. Its data analysis, dashboards and document storage capabilities can also ensure your business approaches upcoming audits with confidence rather than anxiety.
And my third piece of advice is to ask for help.
With compliance audits on the rise, getting an external expert to review your customs data and compliance processes with independent and fresh eyes can help give you and your business peace of mind.
And we shouldn’t forget that customs rules and systems are changing rapidly and often. Experts, like our advisory teams at the Chartered Institute, spend a large amount of our time monitoring and interpreting these changes so that businesses don’t have to.
So, if you’re concerned about your company making customs duty mistakes or declaring goods incorrectly, get in touch – we’re here to help.
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