Customs and excise quarterly update – May 2025

Welcome to the May 2025 edition of RPC's Customs and excise quarterly update.

News

UK publishes draft CBAM primary legislation for technical consultation

The government has published a technical consultation on draft primary legislation for the UK Carbon Border Adjustment Mechanism (CBAM), which is set to come into effect on 1 January 2027.

The CBAM will apply a carbon price to certain imports including aluminium, cement, fertilisers, hydrogen, and iron and steel, to address carbon leakage and align with the UK Emissions Trading System (ETS). Importers will pay a levy based on the embodied emissions in goods and the UK ETS price, calculated quarterly. Businesses importing over £50,000 worth of CBAM goods annually, must register with HMRC.

The draft legislation includes exemptions for UK-origin goods and non-business imports. Secondary legislation and further guidance will follow, alongside the launch of a CBAM industry working group.

Businesses should begin reviewing supply chains, emissions data, and their compliance obligations now in readiness for the 2027 rollout. Early engagement will be key to ensuring minimum disruption.

Details of the consultation, as well as a copy of the draft legislation, can be found here.

The consultation closes on 3 July 2025 and responses to the consultation can be sent to cbampolicyteam@hmrc.gov.uk.

Government backs British businesses to enhance trade

The Chancellor, Rachel Reeves, has unveiled measures to ensure a level playing field for UK businesses amid evolving global trade dynamics. The government is enhancing support for businesses to report unfair practices, improving trade data monitoring, and accelerating actions to counter import surges. Additionally, a review of the customs treatment of Low Value Imports, which allows goods valued at £135 or less to enter the UK duty-free, will be carried out, to address concerns from retailers about unfair competition. These steps align with the government's broader Plan for Change, which is intended to foster a fair and open global trade environment that benefits UK businesses.

Further details can be found here.

UK trade deal with India

The UK and India have concluded negotiations on a Free Trade Agreement (FTA) aimed at doubling bilateral trade to $120 billion by 2030. The agreement is expected to reduce tariffs on key British exports, including Scotch whisky and automobiles, and enhance market access for services such as intellectual property and telecommunications. Notably, the FTA is anticipated to create significant opportunities in sectors like logistics, retail, green energy, and premium consumer goods.

As the FTA progresses, UK businesses should closely monitor developments and assess the implications for any operations they have in India.

Further details on the FTA can be found here.

Case Reports

Uflex Europe Ltd v HMRC [2025] UKUT 00057 (TCC)

Uflex Europe Ltd (Uflex) was unsuccessful in its appeal to the Upper Tribunal (UT), regarding the late submission of a Generalised Scheme of Preferences Certificate of Origin (GSP Certificate) for imported pet food bags.

Upon importing the pet food bags, Uflex applied a customs classification, in good faith, which resulted in a 0% duty being due. As such, Uflex believed there was no need to submit "Proof of Origin" documentation, including a GSP Certificate. The customs classification was later determined to be incorrect. Uflex subsequently claimed it was entitled to a lower rate of duty retrospectively on the import of pet food bags because these events amounted to "exceptional circumstances" justifying the late submission of its Proof of Origin documentation.

HMRC disagreed and Uflex appealed to the First-tier Tribunal (FTT). The FTT concluded that no "exceptional circumstances" existed to justify the delay, resulting in the dismissal of Uflex's appeal. Uflex appealed to the UT.

UT decision

The UT upheld the FTT's decision that no "exceptional circumstances" existed to justify the delay.

The UT concurred with the FTT's findings that Uflex had failed to present the required GSP Certificate within the statutory period of ten months from the time of import.  The onus was on Uflex to ensure timely submission and the mere misclassification of the goods did not constitute "exceptional circumstances" under the relevant legislation. Consequently, the UT dismissed Uflex's appeal.

Why it matters

This case highlights the importance of strict adherence to customs documentation deadlines. It is unlikely that businesses will be able to successfully rely on administrative errors or misclassifications as a valid reason for missing statutory deadlines. The decision serves as a cautionary tale for importers to maintain diligent compliance with customs procedures if they wish to avoid financial penalties.

A copy of the decision can be found here.

Roseline Logistics Ltd v HMRC [2025] UKFTT 427 (TC)

Roseline Logistics Ltd (Roseline) was unsuccessful in its appeal to the FTT, regarding a post-clearance demand for import VAT.

Between 7 January and 11 May 2022, Roseline made 32 different import declarations of Postponed VAT Accounting (PVA), whilst purporting to act for QP Trading Ltd (QPTL) as their appointed customs agent.

The purpose of using valid PVA forms is to allow the payment of import VAT to be postponed from the moment goods are imported, to the date of the VAT return. HMRC alleged that QPTL was not VAT registered and therefore could not use the PVA system. Moreover, HMRC contended that Roseline knew, or ought to have known, that QPTL was ineligible to use the PVA system given the available guidance provided by HMRC. Consequently, Roseline, as the customs agent, was jointly and severally liable for the VAT.

Roseline appealed to the FTT.

FTT decision

The FTT dismissed Roseline's appeal and upheld HMRC's decision, finding Roseline jointly and severally liable for £1,126,249.64 in unpaid VAT due to invalid claims for PVA made on behalf of QPTL.

The FTT determined that Roseline, acting as a customs agent, was responsible for ensuring the accuracy of the PVA claims made on behalf of QPTL. Since QPTL was not entitled to use PVA at the time of the declarations, Roseline was found liable for the unpaid VAT under section 6(3)(b) and 6(3)(d) of the Taxation (Cross-border Trade) Act 2018. The FTT also considered whether this liability infringed Roseline's rights under the European Convention on Human Rights and concluded that the statutory provisions were compatible with those rights.

Why it matters

This case demonstrates the importance for customs agents to carefully verify the eligibility of their clients to use PVA before submitting import declarations. It also highlights the potential financial risks for agents who do not ensure compliance with VAT or other customs regulations, even when acting as a direct representative on behalf of clients.

A copy of the decision can be found here.

Turkish Food Supplies Ltd v HMRC [2025] UKFTT 496 (TC)

The FTT partially upheld an appeal by Turkish Food Supplies Ltd (TFS) against a demand for import VAT issued by HMRC. The FTT ruled that TFS was not liable for VAT on certain advance payments made to its Turkish supplier, Vitan Organik, but upheld HMRC’s assessment for a separate transaction involving bottled water imports.

FTT decision

The FTT examined two separate import transactions:

1. Advance Payments for Future Imports: TFS had made advance payments to Vitan Organik to secure better pricing for future imports. HMRC argued that these payments should be included in the customs value, thereby increasing the VAT liability. The FTT concluded that these payments were not for specific goods and did not meet the criteria for inclusion in the customs value. The FTT therefore allowed this aspect of TFS's appeal.
   
   
2. Under-Declared Import of Bottled Water: TFS did not provide any written or oral submissions to discharge its burden of proof as to whether VAT was paid on a particular import of bottled water. Accordingly, the FTT agreed with HMRC that TFS did not pay import VAT on a declared undervalue of this import. This aspect of TFS's appeal was therefore dismissed.

Why it matters

This case confirms the importance of accurately declaring the customs value of imported goods and maintaining clear documentation to support such declarations. It also highlights that advance payments for future imports, when not tied to specific goods, should not be subject to import VAT.

A copy of the decision can be found here.