Importing goods into the UK should be straightforward, right? But, as many online business owners often discover, the rules around import VAT can be a little complicated. Don’t worry, though – our guide will give you a clear overview of what happens when goods arrive in the UK and, more importantly, what you need to do VAT-wise to stay compliant with HMRC. We’ve even thrown in a couple of helpful pointers along the way.
We are Archimedia Accounts, a family-run accountancy business that treats every client like a member of our happy family. We care about you and your business, which is why we offer a range of comprehensive accounting services, including VAT. We’ll take the load off your shoulders so you can continue running your business and making money. Contact our VAT team today to get started!
How does import VAT work?
When you import goods from outside the UK, the government collects tax on it – just like they would for products supplied in the UK. It’s intended to keep things fair and the economy flowing.
As a VAT-registered business, you can account for import VAT in a couple of ways:
- Use the postponed accounting method to account for import VAT on your VAT return.
- Pay the import VAT at the border.
VAT rates are usually the same for imported goods as they are for products supplied in the UK. However, some goods, like antiques and artwork, may have a reduced rate.
Want to learn more? Check out Chris’ latest video on accounting for import VAT.
When do you need to account for import VAT?
If your business is VAT-registered, you’ll need to account for import VAT on any goods you bring into the UK. However, if you’re not VAT-registered, you should think about how importing goods can affect your cash flow and overall profitability, as you’ll still pay VAT but won’t be able to claim it back. We’ll get into this a little later on.
Who does import VAT affect?
Import VAT really only affects you if you import goods from outside the UK (or outside the EU if you’re in Northern Ireland). If this sounds like you, then it’s important to keep a record of all overseas transactions and account for import VAT on your VAT return each accounting period.
Working out your VAT liability on imports can be challenging and time-consuming, and you likely have other demanding tasks to be getting on with. Working with an experienced VAT accountant like us can save you a lot of hassle.
VAT on imports for VAT-registered businesses
Things are a little easier for VAT-registered businesses. When you buy goods from an overseas supplier, they shouldn’t charge you VAT. Instead, once the goods reach the UK, either you or your courier will deal with HMRC and pay any VAT due.
If you don’t want to wait to pay import tax, you can always pay it as you import the goods rather than wait for the VAT return date.
If you use a courier, they’ll most likely pay import VAT on your behalf. Their invoice will show you how much their courier service was and how much VAT they paid. To reclaim this import VAT, you’ll need a C79 certificate from HMRC, which is issued monthly and has the VAT from all the goods you imported that month, as well as the correct VAT code.
There’s one exception to keep in mind, though. If the imported goods are under £135, then VAT isn’t charged upfront. Instead, you’ll use the reverse charge method when filing your VAT return. You’ll need to enter the value in Box 1 and Box 4, as well as Box 7 and Box 8 – in other words, it’s like you’ve bought and sold the goods.
If you’re dropshipping (i.e. you’ve purchased an overseas product that’s being sent directly to your customer from the supplier), then the value is what this customer is paying – it’s called the ‘consignment value’.
VAT on imports for unregistered VAT businesses
If your business isn’t VAT-registered, then you don’t follow the normal rules of VAT. You’ll be treated like a regular person (i.e. a consumer), meaning the supplier will charge you VAT and account for import VAT themselves. If you import the goods yourself, either by your own means or through a courier, you’ll be charged VAT at the border, and, unlike VAT-registered businesses, you won’t be able to reclaim import VAT.
This is common in startups, especially those that import goods in bulk to sell on. To avoid any unexpected cash flow dips, you should factor in the extra 20% VAT cost when you purchase your supplies.
Accounting VAT on imports using postponed VAT accounting
If you’re looking for an easier way of accounting for VAT, then you might consider postponed VAT accounting, which allows you to declare and recover import VAT on the same VAT return.
What is postponed VAT accounting?
Postponed import VAT accounting is a relatively new method that takes the strain off your cash flow. It essentially allows you to delay paying import VAT. Instead of paying VAT at the border, you or your courier quotes the EORI number at customs (found on your customs declaration), which goes straight onto your postponed VAT accounting statement. You can access your import VAT statements from your Government Gateway account.
Don’t have a Government Gateway account? Find out how to set up your Government Gateway account.
So, instead of paying the VAT and reclaiming it on your VAT return, you put the VAT amount on your return without actually getting it back (meaning you put it on Box 1, Box 4, Box 7, and Box 8). Essentially, you treat the transaction as if you’ve purchased and sold the product.
Still confused? Get in touch with our VAT accounting experts
What is the point in trying to estimate import VAT yourself? Use your time wisely. Make your product better, do some marketing, and talk to your customers… don’t mess around with import VAT and C79 certificates! Leave us to do the boring stuff. We always like to point out that a good accountant should save you a lot more in tax anyway!
If you’re reading this because you’re not getting help from your existing accountant, then it’s probably time for a switch. Check out our reviews or book a discovery call. We won’t bite! We’ll give you friendly tax advice that is easy to understand.
At Archimedia, we care about where you want to get to. Our clients value our level of attention and support.
Highly recommend! I was previously using another accountant and the service was awful! It was taking weeks to respond to urgent matters. Since being with Archimedia that has completely changed. I feel like everything is now under control and I have no worries about the accounting side of things! There is always someone at the other end of the phone and any queries are dealt with straight away. I’m also saving a lot more on tax where I was previously unaware of the savings available. I can’t recommend them enough!
– James C.
