How can a bonded warehouse help your business to defer import tax?

How to defer import tax with a bonded warehouse | John K. Philips
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How can a bonded warehouse help your business to defer import tax?

As any business that moves goods throughout global markets will know, importing and exporting can be expensive. Not only do businesses have to consider the costs of materials or products themselves and their transportation, but they also need to factor in customs duties in different countries.

Generally, customs taxes are due on goods arriving from outside the UK once they cross the border – even if they’re only travelling through on their way to another country, without entering the UK market. This can result in paying ‘double duty’ when the destination country also charges import tax.

Whether you’re importing products for sale in the UK or for exportation to a third country, an easy way to avoid unnecessary import taxes or defer duty payments is to use a bonded warehouse. This type of storage facility plays an invaluable part in modern logistics and cash flow management.

As market-leading storage and distribution experts, John K. Philips runs a bonded warehousing facility in North West England. We’re here to explain everything you should know about bonded storage in the UK, and how this method can help your business to bypass or delay import tax duties.

What is a bonded customs warehouse?

Bonded warehouses, also known as customs warehouses, have existed since the 19th century. They provide a secure place for dutiable imports, where the government can keep track of them and the importer can prepare the goods for transfer without having to pay taxes on the goods right away.

A bonded warehouse acts as a tax suspension zone. If you temporarily store goods before exporting them again, they won’t be eligible for import tax, because you won’t be circulating them within the UK. If you do intend to sell the goods in the UK, you’ll have to pay import tax, but it won’t be due until the goods actually leave the bonded storage facility for distribution within the UK market.

Bonded warehouses have to be authorised by HMRC and can be either private or public. Only the owner can use a private warehouse, but they can manage bonded goods for third parties if it’s a public warehouse. Bonded storage can be ‘wet’ or ‘dry’ – wet goods are products eligible for excise duty, like alcohol and tobacco, while most other cargo will generally be categorised as dry goods.

Not only can you store imported goods in a bonded warehouse without incurring customs fees until they leave, but you can also use the opportunity to sort, process, or repackage the goods to prepare them for sale. You won’t have to worry about paying customs duties on large shipments upfront, and when you’re ready to distribute the goods, they’ll be closer to their intended destination.

Who can use a bonded warehouse?

Any business that needs to hold imported goods in storage rather than declaring them and paying duties straight away can benefit from using a bonded warehouse facility. All customs warehouses and keepers are regulated by HMRC, and the bonded storage services available include:

  • ● Appropriate storage, security, and health & safety measures
  • ● Trained personnel to process and monitor goods
  • Electronic barcoding for trackability
  • ● Digitalised inventory for stock management
  • ● Deferred tax declarations and payments
  • ● Completing relevant documentation and notifying HMRC
  • ● Maintaining records for 4 to 5 years

If you’re a company or individual importing shipments of goods that are liable for customs tax, there are many reasons why you might want to store them in a bonded warehouse, including:

  • ● You haven’t set a final destination for the goods after they arrive in the UK yet
  • ● You’re still waiting for legal documentation or licences due to processing delays
  • ● You plan to re-export the goods without them entering free circulation in the UK or the EU
  • ● You’re waiting to receive separate shipments of products so you can combine them
  • ● You need to prepare the goods for sale (e.g. improving the presentation of packaging)
  • ● The facility is more conveniently located than alternative warehousing options

Bonded warehouses are primarily for storage, but you can handle the goods in bonded storage to an extent. If they’re non-perishable and aren’t subject to additional Common Agricultural Policy regulations, you can store imported goods tax-free for as long as you like – to a maximum of 5 years.

How does bonded warehousing work?

Upon arrival in the UK, the goods must travel directly to the approved warehouse, which should provide the required type of storage for the particular goods. For example, frozen goods or hazardous materials will need specialised storage rather than standard racking or pallets.

Placing your goods in a bonded warehouse allows you to store them there until it’s legally or financially viable to send them to their final destination. You can eventually export them or move them to another customs warehouse, preventing liability for duty payments, or release the goods into circulation on the UK market and finally pay the import taxes due at that stage.

Here’s an example: your company imports white goods from China and holds them in a customs warehouse in the UK, until you’re ready to sell them in their intended destination country. When you move the goods to Turkey to circulate them, you’ll pay taxes there but not in the UK, avoiding the dreaded double taxation and staying on top of your finances in the meantime.

This is an ideal situation for larger businesses dealing with international shipments on a regular basis – especially if you don’t already have buyers for the goods. Rather than having to pay duties on top of the cost of imported goods, you’ll get the chance to sell them first, at which point you’ll be liable for duty payments but should now have the funds to take care of them.

This helps you to keep on top of your inventory and cash flow, making your business more efficient. If the bonded warehouse is close to the intended sales area, this also helps your business to reduce transport and handling costs. All whilst ensuring compliance with UK customs laws.

How does using a bonded warehouse benefit your business?

The major benefit of bonded warehouse facilities that we’ve already discussed is the ability to defer import tax payments or to avoid double duty, freeing up cash for use elsewhere in your business. If you’re still not sure whether bonded storage is the right solution, here are some more advantages:

⦿ Long-term secure storage

As long as you continue to cover the storage fees, a bonded warehouse can store non-perishable stock for up to 5 years if you need them to. This gives you plenty of time to sort out mandatory licences and paperwork, which can be especially time-consuming for restricted or controlled goods.

Whether dry or chilled, bonded storage can preserve your goods in prime condition until you’re ready to move them – either all at once or in smaller quantities. Everything is carefully tracked and monitored within and around the secure site, protecting the contents against damage or theft.

⦿ Assistance with customs processes

There’s a lot of legal paperwork and complicated administration involved in importing taxable goods. Many businesses find it easier to delegate this to an authorised agent, like a bonded warehouse-keeper. For importers moving large quantities of goods, it’s much more efficient to defer duties by storing their shipments in bonded warehousing until they’re ready to move them on again.

Some bonded storage providers can also offer integrated logistics for distribution management, which is an additional service that we provide here at John K. Philips. This is especially efficient if you need to transport perishable goods, as you won’t want to store them for too long.

⦿ Access to transport networks

Bonded warehouses also make distribution more convenient due to their locations near major transport links. For example, the John K. Philips bonded warehouse is close to Liverpool ports and Manchester Airport for re-exporting, and motorways like the M6 and M62 for circulating imports.

This allows you to be as close as possible to national networks and international ports, without paying exorbitant quayside storage fees or paying duties for storing goods in a non-bonded warehouse. The closer your goods are, the faster distribution will be, with fewer emissions.

⦿ Staying ahead of market demand

Facilities like bonded warehouses allow businesses to order and transport items in advance of peak sales periods like summer or Christmas. You can store large volumes of goods that’ll be ready to distribute whenever you need them, so you won’t struggle to meet fluctuating seasonal demand.

You’ll have the flexibility to repackage bonded goods and make distribution plans without having to pay upfront customs fees. This also gives you the opportunity to capitalise on exchange rates and other factors that can determine the prices of goods in the market you intend to sell them in.

⦿ Improving customer service

All the elements above combine to provide a smooth and fast service, which can allow businesses to pass on cost and time savings to their customers. Bonded storage enables companies to import and store large quantities of goods, so they don’t run out of their supply and disappoint customers.

Receiving products quickly, in the good condition they expect, gives your customers a favourable impression of your business. This will increase the chances of them buying more products from you in the future, or recommending your company and products to family members and friends.

Want to delay tax payments on your imported goods?

If you’re ready to streamline your business finances and lead times by using a customs warehouse, look no further than John K. Philips. Our HMRC-approved customs and excise bonded warehouse offers the ideal facilities for holding bonded goods in the UK, with 250,000 sq ft of storage space.

It’s important to choose a trustworthy warehousing partner, who not only understands HMRC regulations but can also provide customs processing and distribution support. Here at John K. Philips, we can offer a complete logistics package, including European and international freight.

Why wouldn’t you want to optimise your supply chain and stock management while retaining up-to-the-minute control over your goods? To learn more about how John K. Philips can fulfil your bonded warehousing and logistics needs, contact us by calling 01744 751 000 or filling out our online form.

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