Valuation simplifications
Source: gov.uk (2025-06-25)

Information about valuation simplifications.

Introduction

A simplification is a practical solution to determine an accurate Method 1 price. It establishes legally acceptable additions or deductions to the Method 1 customs value that can’t otherwise be quantified on the date when a customs declaration is accepted.

A valuation simplification can only be used for goods entered to valuation Method 1 and may only be agreed in the following instances:
- where the Method 1 value is not known at the time of import as the price is provisional
- where items that must be added to, or left out of, the overall customs value cannot be quantified at the time of acceptance
These items are defined in law and can be found both in the legislation or at Valuing imported goods using Method 1 (transaction value) (https://www.gov.uk/guidance/valuing-imported-goods-using-method-1-transaction-value#what-to-do-if-the-value-of-the-items-is-yet-to-be-established-at-the-time-of-entry).

There are two types of simplification:

Where the price paid is declared at importation, but then an adjustment is made on a timely basis - usually quarterly or annually, to subsequently account for additional or excludable costs after import

Where an adjustment is made to the price paid at import, such as where an uplift is applied to account for the additional or excludable costs

Application for a simplification

As per Regulation 109 (3) CIDEER (https://www.legislation.gov.uk/uksi/2018/1248/regulation/109/made), the person making the Customs declaration must be authorised by HMRC to use a simplification. The applicant must provide a draft of the intended content of the simplification and identify the parts of the value that cannot be determined, including why. This draft must also set up the basis on which the value can later be determined and state the date by which the valuation would be provided to HMRC.

HMRC will then review the simplification request and notify the applicant that it is satisfied that a simplification can be agreed and of the date by which the value must be declared. The applicant will then make a customs declaration according to the terms of the simplification agreement.

In cases where an adjustment could be made to the price paid at import, such as applying an uplift to account for the additional or excludable costs once the methodology has been agreed upon, customs must treat the value so determined as final. Therefore, no adjustment, up or down, is normally necessary at the end of an accounting period. This is because the simplification should be a similar amount to what the actual costs would be.

However, if it is agreed with the applicant that the uplift will need to be reconciled at the end of the accounting period to be similar to what the actual costs would be, the revised uplift should be reflected in the next accounting period and subsequently.

Getting the data or formula correct from the start of the annual period is very important. HMRC can however review or revisit the formula used for the next accounting period to ensure it remains correct.

In certain situations, there may be a need to reconcile the amounts involved for a particular accounting period. For example, if the amounts declared are likely to be re-adjusted annually under the terms of an agreement between the buyer and seller of the goods, simplifications would not encompass retrospective price adjustments under contract provisions or transfer pricing agreements. This is because the price at the time of acceptance is fixed and known, yet it is acknowledged that the price may be re-negotiated or revised after free circulation.

Example

Company A buys microchips from Manufacturer B. Company A provides Manufacturer B with specialist machinery, free of charge, in order to produce the microchips. Company A makes monthly orders of microchips from Manufacturer B, however the quantity of the microchips ordered by Company A each month is subject to change based upon their sales to third parties within the UK. Company A is based in the UK and is responsible for the importation of the goods into the UK. Once cleared to free circulation, Company A sells the goods to non-related third parties within the UK.

Company A wishes to apportion the value of the machinery over the course of its lifespan. Company A applies to HMRC for a simplification with the reasons they cannot determine a transaction value at time of import. While Company A knows the value of the machinery and the expected lifespan, they do not know the total amount of goods that will be produced using the machinery. As such Company A cannot provide an apportioned figure for the machinery in order to calculate the total value of the goods.

Company A suggests that they provide HMRC with the value annually, a month after their accounting period ends, as they will know the exact amount of the goods produced for that year and therefore can apportion the value of the specialist machinery accurately. HMRC reviews the information submitted by Company A and agrees the appropriate simplification terms.

Company A send the details annually to HMRC, who issue a duty demand for any duty and VAT on these additional costs.

How an importer applies for a simplification

An importer should email a request, explaining why they need to use a valuation simplification procedure together with details of how the amounts will be determined to xxx@xxx.xx (mailto:xxx@xxx.xx).

This email address is for valuation simplification requests only.

For general enquiries on valuation contact imports and exports general enquiries (https://www.gov.uk/government/organisations/hm-revenue-customs/contact/customs-international-trade-and-excise-enquiries).

A Large Business trader should send their request to the Customer Compliance Manager (CCM), and not to HMRC Customs and International Trade Valuation Unit of Expertise.