Import duty/ VAT
Discussion
Hello,
A friend of mine is starting up a small business importing audio accessories from China for sale in the UK. What level of import duty will he have to pay, is it just VAT at 17.5% or VAT plus some other duty defined by the type of product ?
If VAT is paid on the landed cost I assume this can be claimed back if the company is VAT registered, however VAT will need to be charged on the sale price (is this the case if the company is not VAT registered due to low turnover ?)
Lots of questions but said I would give this forum a try for him
Thanks
Ben
A friend of mine is starting up a small business importing audio accessories from China for sale in the UK. What level of import duty will he have to pay, is it just VAT at 17.5% or VAT plus some other duty defined by the type of product ?
If VAT is paid on the landed cost I assume this can be claimed back if the company is VAT registered, however VAT will need to be charged on the sale price (is this the case if the company is not VAT registered due to low turnover ?)
Lots of questions but said I would give this forum a try for him
Thanks
Ben
HMCE website has comprehensive answers to all of your questions, but in brief:
VAT paid on imports is input tax and can be reclaimed (most likely offset) via the usual VAT return form.
Duty is payable at various rates depending on the item being imported and any relevant quotas for that particular good. Seek out the Intrastat Nomenclature and identify the correct code for your intended import. Call customs and they will give you an up to date duty rate. Note that duty and VAT is payable on the freight cost as well if that is shown separately (for instance FOB purchases with freight arranged through a third party).
Note that VAT and duty is payable usually on invoice value, but there can be exceptions (with one of my imports they used cubic metres to guide their calculations).
Calculation is as follows:
Cost of goods - priced in GBP at current exchange rate.
Cost of Freight - priced in GBP at current exchange rate.
Duty @ applicable rate
VAT is charged at 17.5% of the aggregate of all of the above.
VAT paid on imports is input tax and can be reclaimed (most likely offset) via the usual VAT return form.
Duty is payable at various rates depending on the item being imported and any relevant quotas for that particular good. Seek out the Intrastat Nomenclature and identify the correct code for your intended import. Call customs and they will give you an up to date duty rate. Note that duty and VAT is payable on the freight cost as well if that is shown separately (for instance FOB purchases with freight arranged through a third party).
Note that VAT and duty is payable usually on invoice value, but there can be exceptions (with one of my imports they used cubic metres to guide their calculations).
Calculation is as follows:
Cost of goods - priced in GBP at current exchange rate.
Cost of Freight - priced in GBP at current exchange rate.
Duty @ applicable rate
VAT is charged at 17.5% of the aggregate of all of the above.
Eric Mc said:
Of course, the VAT charged at point of entry can only be reclaimed by the business if it is itself VAT registered.
Excise duties are generally unreclaimable.
Excise duties are generally unreclaimable.
Ah, the PH fountain of knowledge. Just the question I need for which I need clarification
I recently made a purchase on the www for some softwear from a German company. The invoice is un euros (paid in euros with CC). The invoice shows 17.5% VAT. They have a German VAT Nº. Can I claim the VAT in the UK?
TIA
Smiler.
smiler - you can only claim back UK VAT. If the VAT quoted is German VAT then you won't be able to claim it back.
If you are a UK VAT registered business, what you need to do is inform your German supplier that you are VAT registered and quote your own UK VAT number. The German supllier will then be able to Zero Rate the invoice he issues to you.
If you are a UK VAT registered business, what you need to do is inform your German supplier that you are VAT registered and quote your own UK VAT number. The German supllier will then be able to Zero Rate the invoice he issues to you.
benyeats said:
If VAT is paid on the landed cost I assume this can be claimed back if the company is VAT registered,
Eric Mc said:
Of course, the VAT charged at point of entry can only be reclaimed by the business if it is itself VAT registered.
Excise duties are generally unreclaimable.
Excise duties are generally unreclaimable.
Duty can be reclaimed if re exported, although if the intention was to re export from the offset, better not put into free circulation, but go the IPR (Inward Processing Relief) route and re export within 6 months. Helps on paperwork, cashflow and expense. Goods cannot be processed in anyway other than repackaged however.
Regarding the purchase from Germany, making all the assumptions that you are VAT registered and it is allowable, then you can do as Eric Mc has stated, or you can contact the member state VAT authority and request the relevant form and reclaim the VAT that way. You will need to prove you paid the VAT, and that you are VAT registered. Unless you really couldn't do the former, the latter is a very, very longwinded way of doing it.
Eric Mc said:
smiler - you can only claim back UK VAT. If the VAT quoted is German VAT then you won't be able to claim it back.
If you are a UK VAT registered business, what you need to do is inform your German supplier that you are VAT registered and quote your own UK VAT number. The German supllier will then be able to Zero Rate the invoice he issues to you.
If you are a UK VAT registered business, what you need to do is inform your German supplier that you are VAT registered and quote your own UK VAT number. The German supllier will then be able to Zero Rate the invoice he issues to you.
Ok, there was no option for this.
If you have paid the German VAT you can reclaim it via a long-winded process. It's all to do with place of supply, for example if you bought and used the software in Germany then you should pay German VAT and reclaim it. If you imported the software to the UK directly, then you shouldn't have paid the VAT assuming you are registered.
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