When is Regime 42 worth it — factors affecting the choice of procedure

How Regime 42 differs from Regime 40

Every customs clearance in the UK requires a Customs Procedure Code (CPC). The two most commonly used codes for commercial imports are CPC 4000 (Regime 40) and CPC 4200 (Regime 42). Although they sound similar, they differ in how VAT is settled and in their formal requirements.

The key difference is straightforward: Regime 40 requires payment of 20% VAT at clearance (or its deferral via PVA, if authorised), while Regime 42 suspends UK VAT entirely — on condition that the goods are immediately dispatched as an intra-Community supply (ICS) to another EU member state, e.g. Poland. Legal basis: HMRC Notice 702/7. For more on the mechanism of the procedure itself, see the article Procedure 42 — zero UK VAT.

Factors affecting the cost-effectiveness of Regime 42

There is no single answer to whether Regime 42 is right — the decision depends on several factors that must be assessed together for your specific situation. Each is described below.

Factor 1: Value of the individual shipment

The higher the value of the imported goods, the higher the UK VAT suspended by Regime 42. The UK import VAT rate is 20% of the customs value of the goods (s. 1 VAT Act 1994). With a low shipment value the benefit of suspending VAT is proportionally smaller, while the administrative costs of Regime 42 remain fixed. With high shipment values the cashflow benefit is significant and sustained.

Key question to assess: what amount of VAT would be frozen or deferred under Regime 40 on each import, and what impact does that have on the company's liquidity?

Factor 2: Import frequency

The administrative costs of Regime 42 — including fiscal representation and CFSP requirements — are spread across the number of imports. A company importing infrequently effectively bears these costs anew on each import, while a company importing regularly spreads them across many declarations. The higher the import frequency, the better the administrative overhead is distributed and the stronger the position of Regime 42 compared with Regime 40.

Factor 3: VAT registration in Poland (VAT-EU)

Regime 42 suspends UK VAT, but does not eliminate the VAT obligation — it shifts it to Poland as an intra-Community acquisition (ICA). To settle the ICA correctly, the importer must be VAT-registered in Poland and hold a VAT-EU number (Art. 97 of the VAT Act). For a company VAT-registered in Poland this is a neutral accounting transaction — the output VAT on the ICA is simultaneously input VAT that can be recovered. For a company without a VAT-EU registration in Poland, applying Regime 42 is either impossible or carries tax risk.

Factor 4: Cashflow impact — the difference between PVA and Regime 42

Under Regime 40, the importer can use PVA (Postponed VAT Accounting), which defers UK VAT settlement to the VAT return submission date. For a UK VAT-registered company this is a mechanism available at no cost. However, PVA only defers VAT — it does not eliminate it. Under Regime 42 UK VAT does not arise at all — the goods are settled solely via the ICA in Poland. Depending on the VAT return cycle and the company's financing conditions, the difference between PVA and Regime 42 may be significant or immaterial — this is an individual assessment.

Factor 5: Administrative overhead of Regime 42

Regime 42 requires meeting additional formal requirements compared with a standard import: fiscal representation in the UK, CFSP authorisation (Customs Freight Simplified Procedures — required by HMRC for simplified customs procedures), and documentation of the intra-Community supply to the EU. These requirements generate a per-declaration administrative overhead that must be taken into account when assessing cost-effectiveness. A customs agent holding their own CFSP authorisation can make it available to the client — without the client needing to obtain it independently.

Factor 6: Whether the goods qualify as an intra-Community supply

The fundamental condition for Regime 42 is that the goods are immediately dispatched as an intra-Community supply (ICS) to another EU member state. If the goods are destined for UK customers and are to remain there — Regime 42 is not available. Eligibility for the ICS depends on the destination and the transaction structure, not on the type of goods as such.

Who should NOT use Regime 42

Regime 42 is an effective tool for managing VAT cashflow, but it is not for everyone. Before applying, make sure you do not match any of the following excluding profiles.

• Companies selling solely in the UK (no intra-Community supply). Regime 42 is inextricably linked to an intra-Community supply — if your goods reach UK customers and their journey ends there, CPC 4200 cannot legally or practically be applied.
• Importers without VAT-EU registration in Poland. Correct settlement of the intra-Community acquisition requires an active VAT-EU registration. Without it, using Regime 42 creates tax risk.
• Companies without an EORI GB. EORI GB registration is a prerequisite for any customs clearance in the UK. Without an EORI no import declaration can be submitted — whether standard or Regime 42.
• Goods subject to sanctions or dual-use controls. Goods listed on sanctions lists (OFSI, EU) or subject to export controls (dual-use) require separate licences and procedures. Regime 42 does not resolve those issues and should not be used in such cases without a full legal review.

FAQ — frequently asked questions about Regime 42 vs Regime 40

How does Regime 42 differ from Regime 40 (CPC 4000)? expand_more

Regime 40 (CPC 4000) is standard UK import — 20% VAT is payable at clearance or deferred via PVA (Postponed VAT Accounting). The goods arrive in the UK and may be sold there or re-exported.

Regime 42 (CPC 4200) suspends UK VAT entirely — instead, VAT is settled in the destination country (Poland) as an intra-Community acquisition. Key condition: the goods must be immediately dispatched as an intra-Community supply to another EU member state. Legal basis: HMRC Notice 702/7.

What are the formal requirements for Regime 42? expand_more

The formal requirements for Regime 42 come from HMRC regulations and include: holding an EORI GB, fiscal representation in the UK, CFSP authorisation (or using a customs agent with that authorisation), documentation of the intra-Community supply to the EU, and VAT-EU registration in Poland for correct settlement of the intra-Community acquisition.

When using easyclearance.pl as your customs agent, many of these requirements are handled as part of our service — without the need for you to apply for them independently.

What determines whether Regime 42 is right for my situation? expand_more

The main factors are: shipment value (determines the scale of VAT suspended), import frequency (spread of administrative overhead), VAT-EU registration in Poland (condition for settling the intra-Community acquisition) and the impact of the released VAT cashflow on the business. Each factor carries a different weight depending on the importer's profile.

For an answer tailored to your company, contact us — we will analyse your situation free of charge.

Can I use PVA instead of Regime 42? expand_more

PVA (Postponed VAT Accounting) is a cashflow tool for UK imports — it defers VAT payment to the VAT return instead of paying at the border. It is simpler to use and does not require an intra-Community supply or fiscal representation.

However, PVA does not eliminate VAT — it only defers it. Regime 42 suspends UK VAT entirely, which makes sense when the goods are travelling to Poland anyway. If your goods are an intra-Community supply, Regime 42 may be more advantageous than PVA from a cashflow perspective — though this depends on the specific circumstances.

Does Regime 42 require CFSP authorisation? expand_more

Yes, in practice Regime 42 through a UK port requires CFSP (Customs Freight Simplified Procedures) authorisation or the use of a customs agent with that authorisation. Obtaining your own CFSP authorisation requires an application to HMRC and compliance with customs guarantee requirements.

easyclearance.pl holds CFSP authorisation — you can use Regime 42 through us without needing to apply for your own.