VAT and Duty on exports and imports
With Brexit soon to become a reality, it is important that UK business understand the importance of exporting and importing goods. As matters stand, the UK will become a “third country” and as such will need to go through all the processes that apply to non-EU countries when goods cross borders to sales and purchases to/from existing EU countries. This mainly means customs duties applying to goods that have, to date, been duty free as the EU is a single market.
Whether importing or exporting, there are important VAT and duty rules and procedures. A business must ensure that it charges and pays the right amount of VAT and duty. The first step for moving goods into, or out of, the UK will be to obtain an EORI number.
Responsibilities for importers
- the importer is normally responsible for clearing the goods through UK customs and paying any taxes
- the supplier needs to provide the documentation an importer needs to clear the goods through customs (and to make payment to the supplier)
- if you are importing (even from EU countries) you are likely to have to pay import duty. This cannot be reclaimed from HMRC
- a business’ responsibilities depend on what it has agreed in the contract. To minimise the risk of disputes, your contract should use one of the internationally recognised Incoterms.
- check what import duty applies – import duty is based on the type of goods you are importing, the country they originate from and their value
- HMRC’s Integrated Tariff sets out the classification of goods and the rates of duty in detail. Your Trade Association or your import agent may be able to assist with classification. You can find reputable freight forwarders through the British International Freight Association.
- an importer may need proof of the origin of the goods to claim reduced import duty for goods from certain countries
- a valuation document is also normally required for imports above a set value
- complete an import declaration. This is normally done using the Single Administrative Document (SAD)
- pay VAT and duty to get the goods released
- the VAT applicable is the normal UK rate for the imported goods when sold in the UK
- regular importers can defer payment of VAT and duty by opening a deferment account with HMRC. A security payment will need to be provided and payments must be via Direct Debit
- From 1 January 2021 Postponed Accounting for import VAT to be introduced for all goods including those from the EU
- account for VAT on returns
- HMRC will send a C79 certificate showing the import VAT you have paid
- VAT on imports (supported by C79 evidence) may be claimed in the same way as reclaims of input tax incurred on purchases in the UK
- import duty cannot be reclaimed
Responsibilities for exporters
- the exporter is normally responsible for clearing goods outwards through UK customs
- the customer is normally responsible for overseas customs clearance and taxes (depending on the Incoterms).
- the exporter will need to provide its customer with the documentation they need to clear goods into their country (and to pay you)
- the exporter’s responsibilities depend on what it has agreed in the contract (see Incoterms above)
- the exporter will need to provide its customer with the documents they need to import the goods into their country. These documents can also be part of the process of getting paid
- as a minimum, the seller will need documents recording details of the:
- goods and their value
- export destination
- how the goods will be transported
- route they will take
- keep copies of all documents giving details of all the sales which have been made.
- record the value of your exports on your VAT return
- consider any responsibility you have for overseas customs clearance and taxes. Normally, as an exporter, you will have agreed that your customer handles this. However, take specialist advice, or use an expert agent, if you are responsible – this will depend on Incoterms
Source Credit – Marcus Ward