Interestingly I've now heard back from UK trading standards, this is now common practice and all couriers, including the Post Office now do this. This is because UK customs now only accept payment for import duty and VAT from a particular registered deferment account. If the 'importer' doesn't have such an account then they will automatically take payment from the courier. The courier is allowed to charge an admin fee to cover this.

Trading standards make clear that the fault lies with SM for NOT making clear that such a charge will apply. SM are also at fault for incorrectly labelling the packaging resulting in a customs overcharge of VAT as they apply a standard shipping rate plus adjustment where shipping costs are not shown.

Thus any 'irk' should be directed towards SM for not making this clear and not towards UPS who are following standard UK practice.