Post-Clearance Customs Checks — How a KAS Inspection Works in Poland and the HMRC Audit

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Poland: KAS customs and fiscal inspection

The legal basis for post-clearance checks is the Act of 16 November 2016 on the National Revenue Administration, in particular Part V, which regulates customs and fiscal inspection. Unlike a classic tax inspection, where the authority gives notice of its intention to start (Article 282b of the Tax Ordinance), a customs and fiscal inspection begins without prior notice — ex officio, on the day the authorisation to carry out the inspection is served on the person inspected (Article 62 of the KAS Act).

Scope and course

A customs and fiscal inspection may cover, among other things, the correctness of customs declarations, tariff classification, customs value, origin of goods, accounting for import VAT and compliance with the conditions of special procedures (for example a customs warehouse, inward processing). Inspectors have the right to inspect the business's accounting, trade and transport documentation.

Report and inspection result

The way the inspection ends depends on its scope. An inspection of compliance with customs law — and of tax law connected with the import or export of goods, if it does not cover other taxes — ends with a report (Article 84(1) of the KAS Act), containing, among other things, the subject and scope of the inspection, the place and time, a description of the factual findings and the evidence documentation. Article 291 of the Tax Ordinance applies accordingly to such a report: a business that disagrees with the findings may, within 14 days of service of the report, submit objections or explanations together with evidentiary requests (Article 84(4) of the KAS Act). If no irregularities are found, no report is drawn up.

Who may be inspected

A customs and fiscal inspection may cover not only the importer or exporter themselves, but also the customs representative acting on their behalf — especially in indirect representation, where the customs agency bears joint and several liability for the customs debt. In practice this means that both parties — the importer/exporter and their customs agency — may be obliged to provide documentation and explanations, which is why good communication and shared access to transaction documentation between the business and the agency are key in any inspection.

Where a customs and fiscal inspection covers compliance with tax law more broadly (for example the business's VAT accounting), it ends with service of an inspection result (Article 82 of the KAS Act). Within 14 days of its service the business may correct, within the scope covered by the inspection, a tax return previously filed — which makes it possible to avoid the inspection turning into tax proceedings (Article 83).

United Kingdom: HMRC post-clearance audit and compliance checks

HMRC has the right to verify the correctness of customs and tax accounting after the goods have been released — through so-called post-clearance compliance checks (“post-clearance audit” is a colloquial industry term). A check may cover, among other things, commodity classification, customs value, the origin of goods used for tariff preferences under the UK–EU Trade and Cooperation Agreement (TCA), the use of special procedures and the correctness of postponed VAT accounting for imports.

How to prepare

In practice HMRC may ask to see trade records — invoices, contracts, supplier declarations of origin, proof of transport, customs value calculations — covering a period of several years back (the standard limitation periods in UK and EU customs law are usually counted in years, not months). A business should be able to provide, within a reasonable time, a complete set of documents supporting the data declared in each declaration.

Consequences of an inspection

If the audit reveals irregularities, HMRC may issue a decision demanding additional customs charges and/or impose a civil penalty (Customs Civil Penalty) — see our separate guide on customs penalties. Against such a decision the business has the right to a statutory review or to appeal to the First-tier Tribunal.

Checking tariff preferences under the UK–EU TCA

A particular area of interest in an HMRC post-clearance audit (and, on the Polish side, in a customs and fiscal inspection) is verifying whether the goods really met the preferential origin criteria entitling them to a zero or reduced rate of duty under the UK–EU Trade and Cooperation Agreement (TCA). Businesses that use origin declarations on the invoice or the REX system should be prepared to present full documentation confirming origin — including supplier declarations, material specifications and evidence of working or processing of the goods — because the incorrect application of preferences is one of the most common findings of inspections on both sides of the Channel.

How to prepare your business for a post-clearance inspection

• Keep customs and trade documentation for the whole period required by law: in the EU at least 3 years, counted as a rule from the end of the year in which the declaration for release for free circulation or export was accepted (Article 51 UCC; for special procedures — from the end of the year in which the procedure was discharged). Remember that tax rules may require longer retention. In the UK, HMRC's clearance guidance recommends keeping records for 4 years.
• Keep a consistent register of customs declarations, CN codes and origin declarations — discrepancies between trade documents and declarations are the first thing an inspection checks.
• Appoint a person in the business responsible for contact with the inspectors and for preparing documents — the lack of a single point of contact prolongs and complicates an inspection.
• If you have doubts about classification or origin, consider obtaining binding tariff information (BTI/ATaR) in advance, before an inspection does it for you.

The role of voluntary correction before formal proceedings

In both the Polish and the British post-clearance inspection systems, the moment an error is disclosed is crucial for the further course of the case. If a business itself notices an irregularity in its accounting — for example an incorrect commodity classification used for a long time — and reports a correction before an inspection formally begins, the consequences are usually limited to paying the additional charges (possibly with interest), without additional sanctions. If the same error is detected only by the inspectors, the case may additionally entail an administrative penalty (CCP in the UK) or fiscal criminal liability (in Poland, in the case of more serious breaches). For this reason a regular internal review of the compliance of customs declarations is cheaper than waiting for an inspection by the authorities.

Differences between a customs and fiscal inspection and a tax inspection

It is worth distinguishing a customs and fiscal inspection from an ordinary tax inspection carried out by the head of the tax office. A tax inspection requires prior notice to the taxpayer (with some exceptions) and gives the taxpayer the right to submit objections and explanations to the inspection report within 14 days. A customs and fiscal inspection carried out by officers of the Customs and Treasury Service does not require notice of the intention to start, and the way it ends depends on its scope: for a customs inspection it is a report with the right to submit objections within 14 days, for a broader tax inspection — an inspection result with the right to correct a return within 14 days. The absence of notice means it is worth having the documentation ready in advance.

Inspections and Authorised Economic Operator (AEO) status

Businesses holding Authorised Economic Operator (AEO) status in the EU or its UK equivalent benefit, among other things, from fewer physical and documentary checks (Article 38(6) UCC), because the customs authorities assume that such an operator has already implemented internal procedures for quality control of declarations, supply chain security and customs risk management. This does not, however, mean a complete exemption from post-clearance inspection — AEO status reduces the frequency and scope of typical random checks, but does not rule out a targeted inspection, for example in response to a specific suspicion of irregularities or as part of a nationwide inspection campaign concerning a given sector or category of goods.

Sources

• Act of 16 November 2016 on the National Revenue Administration (ISAP, in Polish)
• Receiving an adverse customs decision from HMRC — GOV.UK
• CCPG10120 — Introduction: overview of Customs Civil Penalties — HMRC internal manual, GOV.UK
• UCC Article 51 (retention of documents) — legislation.gov.uk
• Clearing goods entering, leaving or transiting the UK (keeping records) — GOV.UK
• Compliance checks: customs and international trade (CC/FS1g) — GOV.UK

This article is for information only and does not constitute legal advice. In a disputed matter, consult a tax adviser or a lawyer.

If you would like to check whether your business's documentation is ready for a possible inspection, contact us.

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