Customs valuation royalties: UK rules for licensed goods

A British webshop buys licensed merchandise from an EU supplier and also pays for rights connected with the range. The supplier’s invoice shows the goods, while a separate agreement describes a licence payment. Whether that payment belongs in customs value depends on its relationship to the imported goods and sale. This article is for shops arranging licensed-goods imports into Great Britain. It addresses that valuation question, rather than repeating the general DDP, import-charge or commercial-invoice guides. Bring the actual agreements to the entry reviewer before assuming that the goods invoice is the complete valuation record.

When does a royalty belong in the customs value? #

The HMRC royalties guidance requires both a connection with the imported goods and payment as a condition of sale. Start by identifying what your licence allows and how it connects with this purchase. A reference to a brand somewhere in your accounts does not answer either test. Equally, a separate invoice from the rights holder does not by itself show that the payment is outside the import valuation.

Put the merchandise purchase order beside the licence agreement. Identify the product range, permitted territory, payment obligation and any link between buying the goods and paying the rights holder. Ask the supplier to explain that link where the documents are unclear. For a webshop carrying both licensed and unrelated stock, connect the payment to the applicable products instead of adding the whole amount to every incoming shipment. The reviewer needs the contractual facts for the goods being declared.

Does paying a separate licensor keep the amount out of customs value? #

HMRC describes several ways a payment can be a sale condition, including a seller requirement, satisfying the seller’s obligation or a situation in which the buyer cannot purchase the goods without paying the licensor. Trace the obligation rather than looking only at the payee’s name. Show the entry specialist the relevant clauses and explain who requires the payment. Keep a clear distinction between the amount already included in the goods price and any separately payable amount requiring review.

This exercise can uncover a purchasing-system problem: the shipping team may receive only the merchandise invoice, while finance receives the licence statement later. Set an internal flag for the affected product range and route the agreement to the entry reviewer. The flag should describe a required review, not automatically add an arbitrary surcharge. Otherwise the same payment can be omitted from one shipment and counted again in another without anyone understanding the difference.

How do you allocate a payment covering goods and other elements? #

HMRC permits apportionment where a payment partly relates to imported goods and partly to other components or services. Its guidance points to the licence agreement or the licensor as possible sources of the allocation basis. Ask for a supported breakdown. An accounting label such as marketing expense does not settle what the payment buys. Nor does dividing the total evenly across all stocked items establish a connection with the particular goods in the import entry.

Keep the allocation explanation understandable to someone outside your buying team. Identify which product lines are included, which elements are excluded and what document supports the distinction. If the range changes during the licence period, review the allocation with the new facts. A method built around the previous selection of goods may not explain the current purchase. Preserve the original explanation and the reason for changing it so later statements can be reconciled to the corresponding entries.

Can you use Method 1 if the allocation cannot be established? #

The royalties guidance says that where the information needed for allocation is unavailable, Method 1 cannot be used and Method 2 must be tried. The general Method 1 guidance also addresses conditions or consideration whose value cannot be determined in relation to the goods. Discuss the valuation method before submitting an unsupported goods-price-only declaration. A provisional internal estimate does not make the missing contractual information available.

Record exactly what remains unknown. Perhaps the agreement covers several rights without a breakdown, or the payment is calculated from information that your supplier has not provided. Send that question to the rights holder and give the response to the specialist. The shipping deadline does not resolve the method choice. Work out the permitted approach for the actual entry with the declarant rather than selecting a convenient percentage solely to complete a booking form.

Are rights to reproduce the imported goods treated differently? #

HMRC identifies an exclusion for payments for the right to reproduce imported goods when those payments are shown separately from the price paid or payable for the goods. Establish which right your shop is actually purchasing. A right to reproduce, a right to use a trademark and permission to sell licensed finished goods are different contractual descriptions. Have the reviewer examine the wording instead of relying on the fact that all three can appear under a general licence heading.

For a merchandise seller, the distinction is operationally useful. The agreement may permit resale of finished products without granting a reproduction right at all. Ask the licensor to identify the relevant rights and their price presentation. Store that clarification with the purchase, rather than copying an exclusion from a contract covering a different activity. The exclusion is applied to the actual payment under its conditions, not to every fee containing a copyright-related description.

Why is the import VAT worksheet different? #

The HMRC import VAT valuation guidance says royalties and licence fees need not be included in import VAT value, treating them as service charges dealt with under the relevant reverse-charge and international-service arrangements. It also sets out additions such as relevant incidental expenses and import duties. Have the reviewer prepare the appropriate VAT basis separately. A royalty adjustment for customs duty is not a reason to leave the VAT worksheet unexamined.

Keep the reconciliation visible: the duty valuation explains its royalty treatment, while the VAT valuation explains the treatment of that fee and the other applicable costs. Finance can then match the licence payment to the service-side VAT review without treating it as though it disappeared from the business. Ask your accountant to assess the actual parties and service supply. This article gives no fixed VAT or duty percentage for an unspecified product or agreement.

What should you hand over before the EU supplier dispatches? #

1. 1

   Connect the contracts

   Send the goods purchase and licence agreement together, with the relevant clauses and merchandise references clearly identified.

2. 2

   Explain the payment

   State who pays whom, what obligation it meets, what is already in the invoice and which elements remain uncertain.

3. 3

   Obtain the valuation review

   Have the declarant record the inclusion tests, any supported allocation, method choice and the separate import VAT treatment.

4. 4

   Reconcile later statements

   Keep subsequent licence statements with the reviewed entries and ask the specialist how changes or missing information should be handled.

The related commercial invoice checklist helps explain the connection between product descriptions, quantities and transport documents. Here the extra handover is the licence agreement and valuation decision. A complete invoice can still be only part of the total payment record. Keep the valuation note attached to the affected product range so a repeat order reaches the declarant with the contractual facts already visible.

How do you keep parcel transport separate from the royalty adjustment? #

AirPost’s Germany-to-UK route retrieved on 10 October 2026 showed a suitable small UPS parcel at €19.60 and DHL Paket International at €25.18. The published difference is €25.18 − €19.60 = €5.58. The platform fee of €0.85 is included in each displayed quote. These euro amounts describe the EU dispatch reference; no pound exchange rate is assumed here.

Using the recommended small-parcel preparation fee gives an illustrative UPS dispatch subtotal of €19.60 + €2.25 = €21.85. Your actual sender agreement determines that additional fee. The subtotal excludes packaging and any import-related charges. It is not automatically the freight addition in the customs valuation: give the reviewer the actual transport bill and its components so the relevant amount can be established without treating every platform or preparation charge as identical.

With AirPost fulfilment, the shop can agree physical packing and dispatch with a sender holding its goods. Provide the merchandise and document instructions that match the reviewed import. The sender’s packing task does not require access to your entire licensing negotiation, but the importer and declarant need the facts required for valuation. Keep those responsibilities clear when handing over repeat orders from the licensed range.