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NASS, ISTA and BSSA Letter to HMRC and Parliament

Dear Sirs,

NASS and ISTA are representative bodies of the Steel Industry in the United Kingdom, which
you will be aware is a key industry in the country. The below companies (“the “Companies”)
have been affected by a retrospective duty claims project by HMRC, concerning the purported
incorrect use of a Duty Override code.

Specifically, we have been informed that HMRC contend that the affected taxpayers have been
in default by importing commodities with the incorrect use of a Duty Override code. This has
led to HMRC issuing assessments a retrospective claim for 25% additional duty of the customs
value declared on these imports. We believe the figure being claimed across the affected
taxpayers is in-excess of £25M.

Having considered the facts and circumstances of the affected taxpayers, we consider it clear
that this is not a case of industry-wide ignorance or error, but rather a result of HMRC systems
issues and unclear/inconsistent guidance, exacerbated by post-Brexit complexities.

The affected companies and their clearance agents have vast experience in importing these
goods and utilising quota facilities. Therefore, where unexpected systems issues are
encountered as part of the import clearance process, it is wholly reasonable for these parties to
consult HMRC for guidance and assistance and act upon the guidance provided to resolve the
issue. We have evidence demonstrating that multiple companies and their clearance agents took
this action.

In these circumstances, and where it cannot be said that there has been tax loss, we strongly
consider that this issue should be resolved collaboratively between HMRC and the affected
taxpayers, on an industry-wide basis.

More generally, our discussions and exploration make clear that HMRC’s approach to this
issue and affected taxpayers has been inconsistent and unreasonable, and falls foul of the
legitimate expectation that has been created through direct communications and practice. In
particular:

1. We have been made aware that some companies have settled their claim, but due to
receiving their default notices earlier than others, that they have also been able to benefit from
being able to reduce their claim by offsetting their imports against a balance on quotas that had
not been used. It is our group argument that the fact that HMRC have written to companies
over a long period of time that this action has meant that certain companies have received
preferential treatment.

2. All of the affected Companies were told by HMRC that they had written to them months
before the claims/assessments being made, asking them to review their imports and use of the
said override code. None of the Companies can trace receiving such communications. We
return to this point below.

3. We would also challenge HMRC’s position that there were no system errors. The
quantity of examples and data that we hold indicates that this cannot have been the case. Indeed,
many of the transactions being questioned were cleared by HMRC via Route 1 clearance. As
you know, this would mean that the documentation would have been verified by HMRC before
clearance at the port could be obtained.

We also have evidence that the CHIEF/CDS system was not working correctly.
Numerous Freight Clearance companies used by the companies below have all confirmed that
there were several issues at the time of processing. We are collecting this information and will
be able to provide this as evidence that the system was not able to process some items and link
it to the quota. Each of the freight clearing companies have AEO certification. This means that
all have been certified by HMRC as being fully conversant, and up to date with legislation,
operating in circumstances where they import such goods on a regular basis. The conclusion is
therefore that the system had inherent system issues that caused the problems, and this is
reiterated by the fact contact was made with HMRC by companies to clarify the situation.

4. There is also evidence that the affected Companies were advised (either directly or
indirectly via the Freight Clearance companies acting on their behalf) to use the override code
in correspondence with HMRC from 1 January 2021, when contact was made to discuss the
above systems issues identified. Put another way, companies followed the guidance given to
them in circumstances where trade was being impacted, and no guidance to the contrary/or to
stop using the code was ever issued. Notably, HMRC have not been able to provide copies of
correspondence purportedly sent, despite several requests having been made to do so.
To reiterate, given the number of impacted companies (listed below), it is evident that this
situation does not represent a wilful act to avoid the payment of duty. Many of the affected
Companies were, and have continued to use the delayed clearance options available to them,
putting items into a bonded warehouse, and clearing when quota became available, and the use
of the 90-day delay at no cost offered by many of the port operators that work with Companies
within the steel industry.

Whilst the affected taxpayers maintain their position and that the duty sought is not due, they
are keen to resolve this issue without recourse to litigation. As such, on behalf of our affected
members listed below, please treat this letter as a request for these taxpayers to be treated as a
single group, and as an invitation to a “without prejudice” meeting to discuss resolution.