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End Use procedure changes: Impact on oil and gas sector

End Use procedure changes: Impact on oil & gas sector

HMRC's new End Use procedure changes will lead to more admin for oil & gas businesses and the potential imposition of Import VAT and Customs Duty.

Claire Angell

Partner, Head of Energy Tax

KPMG in the UK


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End Use procedure changes

On 10 January 2018 HM Revenue & Customs published Customs Information Paper (CIP) 33 which changes the application of End Use relief with effect from 31 July 2018. The changes detailed by HMRC will lead to an increased administrative burden for oil & gas businesses and the potential imposition of Import VAT and Customs Duty.

Businesses should review current arrangements in relation to End Use relief to understand the impact of the new guidance and prepare for the practicalities of managing the upcoming changes.


The introduction of the Union Customs Code (UCC) in May 2016 brought major changes in the operation of customs special procedures (for example customs warehousing, inward processing, End Use) in the EU. Clients in the oil and gas sector commonly apply these reliefs to imported products or parts which are to be exported to the continental shelf or assigned to a specific approved use, and therefore this sector is particularly affected by the changes.

Goods imported into the EU are regulated by a range of measures aimed at giving EU and UK businesses an equal footing with businesses elsewhere in the world. One of these is End Use relief which allows a reduced or zero rate of customs duty on some goods (e.g. hydrocarbon oils) when used for specific purposes and within a set time period. In the UK, to be eligible for End Use relief, products must meet defined criteria and be identified in the Trade Tariff. Previously there were a number of ways the End Use procedure can ultimately be discharged. These were when the goods:

  • Are put to a prescribed use - as listed in the Tariff - within the time limit given in your authorisation;
  • Are destroyed; or
  • Are exported.

The UCC Special Procedure Guidance was amended in November 2017 in seeking to achieve common interpretation in all Member States. One of the technical changes published means that the assignment of the goods to the prescribed End Use must (physically) take place within the EU. However, both UCC legislation and the updated Special Procedure guidance state that the End Use procedure may be discharged by exporting goods. Such export should be approved by the customs authority. The guidance does not explicitly cover where the ultimate destination of the goods is unknown at the time of import, or the import goods may be split and some exported and some assigned to the End Use.

HMRC position

CIP 33 states that HMRC will not issue an authorisation for End Use relief where assignment of the goods outside the EU is planned. In addition to CIP 33, HMRC updated its UK End Use guidance which now suggests that End Use cannot be discharged by exporting the goods outside the EU. According to the guidance, where such “assignment” outside the EU is envisaged, it is suggested the goods may, for example, instead be placed under customs warehousing or temporary storage pending re-export to avoid EU duties.

In our view, HMRC’s guidance may not be in accordance with the applicable UCC legislation. The EU guidance only ‘suggests’ that the goods should be placed under a different procedure if the assignment to the prescribed use will take place outside the EU. As such, we believe that if HMRC’s interpretation is as strict as appears, it may pose a significant cost to the oil & gas sector operators that utilise End Use relief because it does not provide the flexibility that traders have historically had to simply export goods placed under End Use without payment of duty. This is particularly important where the use or destination is unknown at the time of import or the goods may be split amongst uses and destinations. In our view this flexibility is commercially essential.

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