Sep 1, 2022

HMRC guidance on moving to the Customs Declaration Service

Alex Baulf

The UK’s tax and customs authority has issued new guidance for businesses setting out the key steps to moving to the Customs Declaration Service (CDS). As a reminder, the CDS replaces the legacy Customs Handling of Import and Export Freight (CHIEF) system which is being retired. CDS is a modern IT platform with the flexibility to scale in line with the government’s plans to have “the world’s most efficient customs system by 2025”.

Many businesses are already using CDS in order to take advantage of Postponed Import VAT Accounting, which allows UK VAT registered businesses to defer paying Import VAT when goods are imported into the UK and instead apply a reverse charge (a self-assessment with a simultaneous input tax deduction) in the UK VAT return.

Timetable for CHIEF system closing

The CHIEF system will close in two phases:

Phase	Date	Implication
Phase 1	September 30, 2022	Ability to make import declarations will end
Phase 2	March 31, 2023	Ability to make export declarations will end

With effect April 1, 2023, CHIEF will be fully closed and businesses (and customs brokers and agents submitting declarations on behalf of businesses) will need to use the CDS to declare all goods imported into or exported from the UK.

HMRC has listed eight steps that businesses need to follow in order to use CDS going forward for declarations:

1. Register for a Government Gateway account

Most businesses will already have a Government Gateway account to access their personal or business tax account (including the VAT account). Businesses should use the Gov account to access the Customs Declaration Service. If a business doesn’t already have an account, it can register for a Government Gateway account online.

2. Apply for an Economic Operator Registration and Identification number

Businesses need an Economic Operator Registration and Identification (EORI) number in order to import goods into, or export goods out of the UK. A UK EORI number starts with GB. Again, most businesses involved in importing and exporting should already have one, but if needed, businesses can apply for an EORI number online.

3. Register for the Customs Declaration Service

Businesses will need to register for the Customs Declaration Service. Please note that this can take up to five working days. In order to register online, businesses will need the following information:

Government Gateway user ID and password
GB EORI number
10-digit Unique Tax Reference (UTR) number (for UK businesses)
business address that HMRC holds on its customs records
date business started

4. Authorise a software provider to make declarations on your behalf

Businesses need to authorise their customs software provider in order to link the software to the Government Gateway account. Your software provider will tell you how to do this.

5. Check HMRC guidance on CDS

The CDS is built on the Union Customs Code (UCC), the European Union’s legislative framework for customs rules and procedures which entered force on May 1, 2016. As this is fundamentally different from the historic Community Customs Code which CHIEF was based on, there are key differences between CHIEF and the Customs Declaration Service. Please note that a declaration submission on CDS using the CHIEF tariff will be rejected because the codes won’t be recognised by the system.

Key differences between CDS and CHIEF

Area	CHIEF	CDS
System	IT system based on a paper form	Fully electronic system where all data is exchanged digitally
Customs legislation	Community Customs Code (CCC) and Single Administrative Document (SAD) Harmonisation rules (boxes)	Union Customs Code (UCC) and Data Integration and Harmonisation rules
Tariff – declaration completion requirements	Requirements can be found in the CHIEF Tariff	Declaration completion requirements can be found in the CDS Declaration Completion Guidance.
Data Entry	68 Paper form multi-use boxes, on a SAD form.	91 Single use data elements with different data sets for every type of declaration
	Designed for customers who complete paper records, with several boxes that accept data in a free text format and containing multiple pieces of information.	Entries are restricted to code format, except for name and address and goods description fields
	Supporting documents submitted online via the Customs Trader Service.	Supporting documents submitted via the Secure File Upload Service.
Procedure codes	7-digit fixed Customs Procedure Codes (CPCs) for each goods item	Codes split into 2 parts; a single 4-digit Procedure Code combined with up to 99 different types of 3-digit Additional Procedure Codes (APCs) for a single goods item
	CHIEF CPCs and CDS Procedure Codes/Additional Procedure Codes are different/not the same. There are CPCs for each type of declaration	CDS Procedure Codes/Additional Procedure Codes are always the same for standard and/or supplementary declaration types
Error codes	4,000 separate error codes	200 error codes pointing to the exact data element where the error has occurred so errors can be interpreted and resolved
Finance	Payments via a Duty Deferment Account, Guarantee - and/or via the Flexible Account System (FAS)	Several payment options including a new cash account and immediate payment options. CDS provides access to all financial information in a single customs financial account where you can view account statements, make payments and control standing authorities.
IT access	Access to CHIEF is via Community System Providers (CSPs)-linked agents, Electronic Data Capture Service (EDCS) or NES Web Service. Users are identified by a badge	Access to CDS is via HMRC’s Digital Tax Platform. CDS system access is available to all traders, identified by their EORI number. Subscription to CDS enables access to customs financial accounts, an exports declaration User Interface (NES replacement) and supporting services eg, Secure File Upload. Import declarations need to be made using external software

6. Choose payment method to use

Businesses can choose the payment method for the customs declaration. Balances and payments can be viewed in the CDS Financial Dashboard and businesses can grant and amend standing authorities for their payment accounts. The main payment methods that can be selected are:

i) duty deferment account (the CDS uses a separate HMRC bank account to CHIEF, so businesses will need to set up a new direct debit

ii) postponed import VAT accounting (PIVA)

Businesses can also choose:

iii) cash account (replacing the Flexible Accounting System (FAS), one will be set up once registered for CDS)

iv) Bacs, CHAPS, online or by telephone banking (businesses can pay by debit, corporate credit card or cheque)

v) individual guarantee (to cover customs duties for one-off or high value imports)

vi) general guarantee account (allows businesses to provide multiple guarantees from the same account, and continue importing goods into the UK and pay a disputed amount later once agreed)

7. Get access to the Trader Dress Rehearsal service

The Trader Dress Rehearsal service allows businesses to practice submitting declarations and identify any errors before starting to use the CDS.

8. Submit live declarations

The software provider will make the request for access to the live service. The secure file upload service should be used when a business submits its supporting documents e.g. licenses or certificates of origin.

Being set up ready to use CDS is only the start of being customs compliant and importing and exporting in a seamless fashion. It's essential to assign the right HS codes, known as 'commodity codes' in the UK, to any items you sell across borders, so customs authorities can apply the correct duties and taxes. Contact Avalara to discuss our Avalara Tariff Code Classification solution.

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.

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