While the vast majority of goods become taxable as soon as they enter the UK, using a bonded warehouse can help businesses defer duties and VAT payment, creating cash flow and supply chain efficiencies as a result.
They’re a vital part of the importing processes, but many businesses either are not aware they exist or don’t understand how to use them effectively. At DG International, we’re here to rectify this. In this article, we explain exactly what a bonded warehouse is, how it works, why and when businesses should consider using them for the greatest advantage.
A bonded warehouse is a safe and secure space in which goods can be stored free from import duties and VAT. Effectively, the storage acts as a duty-free zone where any applicable tax will only need to be paid when the goods are distributed for sale.
There are two types of bonded warehouses: wet and dry. Wet bonded warehouses store alcohol and tobacco. Dry bonded warehouses store most other goods you can think of.
Once products are delivered to the warehouse, both the importer and warehouse owner become liable for the goods under a bond. This liability is only canceled when the goods are exported, destroyed or sold to local markets after payment of duties.
That doesn’t mean these goods – known as bonded goods when stored this way – can’t be accessed. In fact, companies are free to sort, process and package any goods stored in bonded warehouses.
Bonded warehouses can be run by the government, but there are many, like are own, that are overseen by certified transportation and warehousing providers, that work with customs to streamline the inspection and duty collection process. In either case, they are strictly regulated by the UKs HMRC.
Rules must be followed to the letter and regular checks ensure they are used properly.
Storing goods in bonded warehouses offers many benefits to retailers importing foods to sell in the UK.
Deferring the payment of customs duties and VAT is the primary benefit of bonded warehouses. Because payment is only due when goods leave the warehouse, retailers can ease cash flow pressures. It also gives time for businesses to carry out pre-sale activities, like sorting and repackaging products.
If you would like more advice about how to calculate VAT on any imported goods, visit our blog on the topic.
For businesses planning to export the goods in the future, bonded warehouses mean duties can be avoided completely.
Perishable goods aside, products can be stored in UK bonded warehouses indefinitely. As a result, goods can be stored for as long as it takes to complete paperwork or overcome any issues or restrictions. As previously mentioned, goods can be held for as long as it takes to export them again.
A bonded warehouse provides all of the safety measures you’d expect from a warehouse (like CCTV and 24/7 monitoring), but goods must also be fully documented before entering. With regular inspections by HMRC agents and warehouse operators, you can have peace of mind that your goods are protected as much as possible.
As the vast majority of the UK’s bonded warehouses are located close to major ports and airports, it’s incredibly easy to distribute goods once they come out of storage. The result is a significant reduction in transportation costs and timescales.
Bonded warehouses are one of the best ways to store restricted goods like alcohol, tobacco and certain food products. The extra legal requirements involved with these goods can make paperwork complicated. As such, the extra breathing room offered by bonded warehouses is often welcome.
With the UK leaving the European Union, imports from Europe are now subject to customs duties. That hasn’t just meant added costs and cash flow issues for UK retailers. It also means significantly more paperwork, too.
Where businesses previously imported goods from the EU to the UK without paying any fees, bonded warehouses offer a way to soften the blow caused by Brexit.
For instance, businesses that import from the continent with the intention to sell on immediately don’t have to worry about paying customs duties unnecessarily.
If you’re importing from Europem, Asia or ROW, we have a number of destinations which you might find useful information on.
Businesses that import with the intention to sell to UK consumers can delay payments until products are sold. These businesses can also use bonded warehouses to manage supply by importing goods in bulk ahead of peak demand seasons.
Several major British retailers are already using bonded warehouses to manage the impact of Brexit. Superdry uses them to avoid paying tariffs on products it reexports to the EU, for instance. Other retailers, like Next, have been using them for years prior to Brexit. In other words, you’re in good company by using a bonded warehouse.