Once in a land not too far away from you, there was a family that ran a nice business manufacturing magical machines that could improve the flow of water in systems. These machines were sought after by other businesses in the land but also by companies overseas.  

The Magical Machine company didn’t really want to get involved with exporting. They had heard their own tales of how difficult it was, how things could get delayed, and costs mount up. One day as they were getting ready to wave off their new batch of magical machines on the journey to a regular customer the driver of the truck stayed a while to drink some tea and eat some biscuits. They told him about the potential orders they had, to supply overseas and the truck driver, who knew about these things, told them not to worry. They just had to use the magical words ExWorks in the agreement with the customers and all the problems would go away.

Encouraged by this, the Magical Machine company began exporting using ExWorks as their magical words. And it worked! Machines were collected and vanished off to other countries without them having to do anything. Money poured in and the family was very happy.

That is, until the day the VAT auditor arrived. The VAT auditor sat before the family looking at the invoices for the goods that had been exported and asked to see evidence that the goods had left the realm. You see, they hadn’t charged VAT, well you don’t when you export goods, everyone knows that! But what they hadn’t realized is that they would have to prove to the authorities that it was a genuine export. They said the magical words to the VAT auditor: “But they are sold ExWorks. We don’t do anything but get the goods ready for collection.”

“Oh dear, oh dear,” muttered the auditor sadly, though there was a hint of a smile upon the pale thin lips. “No evidence of export. Then I’ll have to collect the 20% VAT from you.” Taking out a quill pen the auditor quickly jotted down numbers on a pink piece of paper and spun to towards the family with a flourish. The row of 00000’s on the pink paper made the family’s eyes water.

“But the truck driver said the magical words ExWorks would make all our problems go away!” The father cried. The auditor sadly shook their head.

There was a knock on the door. Though Tom and Jane were expecting the HMRC audit team it made them shiver. They had been importing Halloween gifts and clothing for 3 years now, without any issues, but last month an email from Customs had arrived asking them for further information on the goods they were importing. It turned out that Customs didn’t think that boxes of Halloween branded biscuits, chocolates, candles and orange and black clothes could all be entered under the commodity code as 95-05: Festive, carnival or other entertainment articles, including conjuring tricks and novelty jokes.

Reluctantly Jane opened the door. Three customs officers walked in. They were polite but firm.

“You have been importing goods incorrectly. Biscuits, chocolates, candles, and clothing can’t come into the country as festive entertainment articles. There are specific rules you must apply when choosing commodity codes. Didn’t you know that?”

“No, sir”, replied Tom.

“Did you not read the Chapter and Section notes that clearly say: “This chapter does not cover – among other items:

• (a) candles (heading 3406);

• (e) fancy dress of textiles, of Chapter 61 or 62;”

“No, we didn’t read it”, said Jane.

“So, that means you have been paying 2% import duty when the duty rate for your different items should be around ….”, the young officer shuffled some papers and handed one to Jane.  It read

“At least the candles are zero,” whispered Tom to Jane, trying to smile.

“So, as you have been importing these items incorrectly for 3 years, we estimate that you owe us £74,528.90. And of course, additional VAT.”

A sudden gush of wind blew the front door open with a bang, but no one moved.