Customs Valuation Audit: 6 Errors HMRC Commonly Finds

HMRC customs valuation audits most commonly find six errors: freight and transport costs treated incorrectly, buying commissions included in the customs value when they should not be, assists left out entirely, royalties and licence fees omitted, related party prices without supporting evidence, and Incoterms that do not match the invoice. Each one changes the duty you pay, in either direction.

The sums involved are rarely trivial. A textiles importer connected their Government Gateway to BorderAudit last quarter. Within an hour, the platform identified £47,000 in recoverable duty from valuation errors alone. Some valuation mistakes produce underpayments that HMRC will assess. Others mean you have been quietly overpaying for years. This article explains each of the six errors, why HMRC looks for them, and how to check your own declarations before an audit letter arrives.

What Is a Customs Valuation Audit?

A customs valuation audit is a review of the values declared on your import declarations against the evidence behind them: commercial invoices, contracts, freight documents and payment records. It usually forms part of a wider post-clearance audit, where HMRC can reassess declarations for up to three years after clearance.

Most UK imports are valued using the transaction value method: the price actually paid or payable for the goods, adjusted for specific additions and deductions. HMRC publishes detailed guidance on working out the customs value of imported goods. The six errors below all come from getting those adjustments wrong.

Why Does Valuation Attract HMRC Attention?

Valuation errors are systemic rather than one-off. A wrongly treated freight charge or a default Incoterm repeats on every declaration a supplier ships, month after month. A classification error typically affects one product line; a valuation error can affect an entire trade lane.

HMRC's risk analysts know this. Declared values that look inconsistent across similar consignments, or that drift away from invoice totals, are exactly what desk reviews are built to catch. The same pattern is why valuation reviews recover disproportionate value for importers: correct one systemic error and the fix applies across three years of declarations.

The 6 Valuation Errors HMRC Commonly Finds

The same six issues appear again and again, both in HMRC audit findings and in BorderAudit's analysis of importers' declaration data.

1. Freight and Transport Costs in the Wrong Place

Transport, insurance and handling costs up to the place of introduction into the UK are dutiable and belong in the customs value. Costs incurred after arrival, such as inland haulage from the port to your warehouse, do not.

Two errors follow. Importers buying on ex-works terms sometimes omit international freight altogether, understating the value. More often, importers include the full door-to-door freight charge, overstating the value and overpaying duty on every line that supplier ships.

2. Buying Commissions Treated as Dutiable

Selling commissions, paid to an agent acting for the seller, form part of the customs value. Buying commissions, paid to an agent acting for you as the buyer, do not.

The distinction turns on what the agency agreement actually says, not on the label used on the invoice. Where a sourcing agent charges a single fee covering both roles, the buying element is often left inside the declared value, inflating it unnecessarily. HMRC tests the substance of the arrangement, so importers should too.

3. Missing Assists

An assist is anything you supply to the seller free of charge or at reduced cost so they can produce the goods: tooling, moulds, dies, materials, or design work carried out outside the UK. The value of assists must be added to the price paid, apportioned across the goods they relate to.

Assists rarely appear on the commercial invoice, which is exactly why they get missed. HMRC finds them by comparing contracts and payment records against declared values. A tooling invoice paid separately to the same supplier is an obvious flag.

4. Omitted Royalties and Licence Fees

Royalties and licence fees related to the imported goods must be added to the customs value where you pay them as a condition of the sale. Brand licence payments on imported finished goods are the classic example.

Because these payments usually flow through a different ledger to the import invoices, the customs team often never sees them. The gap surfaces when HMRC cross-checks licence and intercompany agreements during an audit, at which point the omission stretches back across every affected declaration.

5. Unsupported Related Party Pricing

When you buy from a group company, HMRC can question whether the relationship influenced the price. Transaction value remains available, but you need evidence that the price is at arm's length.

Transfer pricing documentation prepared for corporation tax does not automatically satisfy customs valuation rules, and year-end transfer pricing adjustments frequently never reach the declared customs values. Both gaps appear regularly in audit findings. Our guide to valuation for related parties covers the evidence HMRC expects.

6. Incoterms That Do Not Match the Invoice

The Incoterm on the declaration tells HMRC what the invoice price already includes. Declare CIF terms against an FOB invoice and freight is missing from the value. Declare FOB against a CIF invoice and you may add freight that is already in the price, paying duty on it twice.

Broker data entry is the usual cause: a default Incoterm applied to every entry regardless of the supplier's actual terms. Reviewing how Incoterms affect customs value supplier by supplier is one of the fastest ways to find systematic over-declaration or under-declaration.

What Happens When HMRC Finds a Valuation Error?

It depends on the direction of the error. Where duty was underpaid, HMRC can issue a C18 post-clearance demand for the shortfall, with interest and potential penalties depending on the behaviour behind the error, covering declarations up to three years old.

Where duty was overpaid, the same three-year window works in your favour. You can apply for repayment of import duty with a C285 claim through the Customs Declaration Service, supported by evidence of the correct value. Our customs duty reclaim guide walks through what a claim needs to succeed.

How Do You Check Your Declarations for Valuation Errors?

You do not need to wait for HMRC. A structured self-review follows five steps:

1. Request your declaration data: your Trader Records Extract (TRE) from HMRC gives you every declaration line, including declared values, ready for analysis.
2. Reconcile invoices against declared values: sample high-value lines and trace each customs value back to the commercial invoice and freight documents.
3. Review Incoterms supplier by supplier: confirm the terms declared match the terms on each supplier's invoices and contracts, and check how freight was treated under each.
4. Map assists and royalties from your contracts: check purchase agreements, tooling invoices and licence agreements for payments that belong in the customs value but never reached it.
5. Test related party evidence: confirm you can demonstrate arm's length pricing and that any transfer pricing adjustments are reflected in customs values.

Doing this manually across thousands of declaration lines is the hard part. BorderAudit runs valuation checks automatically across your full declaration history: it pulls your HMRC data, reconciles values line by line, and flags freight, commission, assist, royalty, related party and Incoterms anomalies for review. Duty reclaim packs are one output of that audit; the visibility itself is the product, and it is free to start.

Fixing Valuation Errors Before HMRC Finds Them

• Six errors dominate HMRC customs valuation audit findings: freight treatment, commissions, assists, royalties, related party pricing and Incoterms mismatches.
• Errors run in both directions: underpayments trigger C18 demands, while overpayments are recoverable through C285 claims for three years.
• Evidence decides valuation questions: invoices, contracts and agency agreements matter more than the labels on them.
• Because valuation errors are systemic, automated checks across your full declaration history find in hours what sample-based reviews miss.

If you want to know what a customs valuation audit would find in your own declarations, check your eligibility for a free audit and see the errors before HMRC does.