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HM Revenue & Customs clears most imported goods quickly, and processes for submitting customs declarations and payments for non-EU imports are straightforward, says a report out today from the National Audit Office. The rate of physical checks at the UK border is below the EU average, however, and the number of audits of traders has dropped substantially since 2005-06.

Ninety-nine per cent of declarations are processed electronically and 90 per cent of goods are cleared immediately. The Department checks documents for about 6 per cent of imports each year and aims to clear 95 per cent of these within two hours. However, a recent quality review by the Department found an 18 per cent error rate in these checks.

The Department has only recently standardised the reporting of physical checks, and these reports suggest that between 2 and 3 per cent of imports get checked. The EU average is 9 per cent, but practices vary across the EU. Additional checks are undertaken and irregularities identified but not reported. The Department needs to improve its reporting, develop a standard for the minimum level of checking and undertake testing to understand compliance levels.

Ninety-seven per cent of goods examined are selected using cargo information and 3 per cent using the Department’s main trade system. The number of examinations as a percentage of imports selected from the Department’s trade system has fallen from 0.3 per cent in 2003-04 to 0.1 per cent in 2007-08. But these examinations have a significantly higher rate of identifying irregularities than those selected from cargo information.

Audits of traders fell by half for large businesses and two-fifths for small and medium businesses between 2005-06 and 2007-08. The chance of a trader receiving an audit fell from 18 per cent to under 10 per cent. The additional revenue from this compliance work is reducing while the level of errors detected is rising, particularly among new traders. For small and medium sized businesses, the level of errors detected has increased from 32 to 39 per cent.

The fragmented management of customs activities within the Department, a lack of clear accountability, and incomplete management information have hindered effective oversight of its performance and risk management.

Tim Burr, head of the National Audit Office, said:

"HMRC has made it easier to import goods into the UK. The lack of information on compliance levels and the declining number of trader audits does however risk diluting the control the Department has over imports. It needs to develop ‘minimum’ levels for checks and trader audits, so that importers pay the right amount of tax and duty, and fully comply with the laws on prohibited and restricted goods."

Notes for Editors:

1. In 2007-08, the UK imported £186 billion of goods from outside the EU. Imports increased on average by 5.7 per cent a year between 1999 and 2006 and represented 11.6 per cent of Gross Domestic Product in 2006. In 2006-07, the Department collected £2.3 billion in Customs Duty and £19.2 billion in Import VAT, representing almost five per cent of total tax revenues.
2. Declarations are not required for EU traffic.
3. The customs process and calculation of duty payable can be complex because of the multiplicity of rates, reliefs and preferential trade agreements agreed at EU level, which are often intended to reduce the costs for traders.
4. The Department is responsible for enforcing 34 regimes that prohibit or restrict types of goods that can be imported into the UK. These include drugs, firearms and certain products of animal origin.
5. Responsibility for border controls to combat social and physical threats transferred on 1 April 2008 from HMRC to the new shadow UK Border Agency, an agency of the Home Office. HMRC retains policy responsibility for managing international trade.
6. Press notices and reports are available from the date of publication on the NAO website, which is at www.nao.org.uk. Hard copies can be obtained from The Stationery Office on 0845 702 3474.
7. The Comptroller and Auditor General, Tim Burr, is the head of the National Audit Office which employs some 850 staff. He and the NAO are totally independent of Government. He certifies the accounts of all Government departments and a wide range of other public sector bodies; and he has statutory authority to report to Parliament on the economy, efficiency and effectiveness with which departments and other bodies have used their resources.