Import duty explained – Small Business UK

There is no such thing as a such single tax as import responsibility: what there may be are totally different taxes and duties, together with Import VAT and Customs Responsibility.

Import VAT, Customs Responsibility, Excise Responsibility

If you are going to buy items from overseas into Nice Britain (England, Scotland and Wales) and Northern Eire from outdoors the UK and EU, you could must pay quite a lot of totally different taxes and duties, relying on the character of the products and the place you bought them from.

Within the UK there are three important types of import taxes that will apply: Import VAT, Customs Responsibility, and Excise Responsibility. Relying on the character of your imports, you could must pay one, or in some circumstances, a number of taxes.

Import VAT

On account of Brexit, the UK is now out of the EU Customs Union and VAT regime. This implies items being imported from the EU into Nice Britain (GB), face new customs declarations, inspection, and Import VAT obligations.

Northern Eire nonetheless has a singular place, as it’s handled as being a part of the EU for VAT functions for provides of products. Because of this as a substitute of Import VAT being due, acquisition VAT is self-accounted for by the shopper on imports of products from EU nations into Northern Eire.

As well as, there isn’t any customs responsibility on items between the EU and Northern Eire (and vice versa).

Import VAT necessities

If you’re importing items from overseas, the usual worth VAT fee of 20 per cent must be paid if their worth exceeds £135 (excluding transport and insurance coverage prices and another taxes and fees recognized by the customs authorities).

The place the sale is made to a shopper within the UK, VAT for items valued beneath this threshold is charged and picked up on the checkout by the vendor.

In situations the place a sale for items beneath the edge is made to a enterprise, it’s then the shopper who’s chargeable for self-accounting for Import VAT by means of its VAT return as a reverse cost.

HMRC’s Built-in Tariff instrument units out the classification of products and the charges of responsibility intimately.

How a lot further you could possibly be charged relies on the full worth of your order. Also called the consignment worth, that is the worth of the products you’ve bought excluding the delivery and dealing with prices. How a lot you pay additionally relies on the agency you’ve purchased from.

In some instances, as a result of supply companies have paid delivery and import prices, you could be requested to pay extra charges by the couriers delivering your gadgets.

If you happen to should pay VAT to the supply firm, it’s charged on the full package deal worth, together with:

• Worth of the products
• Origin of the products
• Classification of the products

Paying import VAT

To assist keep away from items getting caught on the border, you will want to plan the way you want to settle UK Import VAT for the primary time. This may even assist ensure you keep away from shedding it as an unrecoverable value.

There are a number of choices relying on the worth of the products, the kind of buyer (B2B or B2C), and who’s the importer of file (the consignee who acts because the named importer):

Have your buyer pay below Delivered At Place (DAP) Incoterms

Nonetheless, the place the shopper is a non-public shopper (B2C) and the products are beneath £135, this isn’t an choice as there’s a requirement for the vendor to register for VAT and cost VAT on the level of sale. Many B2B clients might settle for this mannequin if they’re conscious of their tasks and there are not any hidden prices e.g., customs responsibility due. For items over £135, customers will likely be unlikely to buy with you once more if they’re hit with an surprising and unwelcome Import VAT and customs responsibility invoice.

Pay at Customs through your freight, delivery, or supply agent

If you’re paying VAT to the supply firm, this may typically should be paid to the supply firm both earlier than the products are delivered or whenever you accumulate them.

Defer the import VAT fee through Postponed VAT Accounting in your UK VAT return

Whichever route you are taking, it’s vital to make sure that you keep the required proof of the import VAT paid so you may get better it from HMRC. It is a C79 doc for situations the place Import VAT has been bodily paid the place you’re the importer or the Postponed VAT assertion the place you’re the importer and have opted to make use of Postponed VAT Accounting.

Do I’ve to pay import VAT right away?

In January 2021, on the finish of the Brexit transitional interval, the UK launched an choice for UK VAT registered companies to defer paying Import VAT when items are imported into the UK and as a substitute apply a reverse cost (a self-assessment with a simultaneous enter tax deduction) within the UK VAT return.

Key options of Postponed Import VAT Accounting (PIVA) are:

• All UK VAT registered companies can use PIVA – each UK companies and overseas corporations
• No financial institution or monetary assure is required
• No must get hold of or use an obligation or VAT deferment account
• Signal as much as the Customs Declaration Service (CDS) on-line simply as soon as
• Choice to postpone UK Import VAT through the use of PIVA on every customs declaration
• UK VAT quantity and Financial Operators Registration and Identification quantity (EORI) quoted on declaration along with a code triggering PIVA
• Month-to-month PIVA statements will often be accessible to view and obtain as PDF paperwork by the sixth working day of the month
• Companies will take the worth of postponed Import VAT proven within the PIVA assertion and self-assess that quantity as a reverse cost within the VAT return
• HMRC will solely present import statements within the on-line VAT account which might be dated inside six months from the date of being revealed.

If you happen to do not need the assist of a 3rd occasion, you will want to work carefully together with your customs agent who might want to assist you by offering you with the documentation you want to ensure that your accountant to think about VAT in your VAT return and reclaim the import VAT as enter tax in the identical return.

Low-value consignments

If you’re importing items beneath the £135 threshold, you could have already got been charged VAT as a vendor.

The foundations for accumulating VAT on low-value shipments coming into the UK rely on who the client is. For the reason that Brexit transition interval ended, the Low-Worth Consignment Reduction (LVCR) was a sort of tax aid for import VAT which utilized to shipments with a worth price lower than £15. For the reason that UK left the European Union, this threshold has been lifted to £135: for each companies and common clients.

Beneath present low worth import guidelines for shipments on to customers:

• Imports on to customers (B2C) ought to pay VAT on the level of sale for shipments price lower than £135
• The vendor is chargeable for charging VAT on the sale

If the cargo is price greater than £135, the shopper pays import VAT and responsibility on the border as detailed above.

For low-value items, sellers don’t must register for UK VAT and VAT doesn’t should be displayed on the customs bill: nonetheless, the customs bill should present the worth of the consignment to be greater than the £135 threshold.

Additionally it is price noting that there are totally different guidelines when promoting to UK companies, or by means of a web based market. The place UK clients purchase items from abroad through a web based market (e.g. Amazon), VAT is paid on the level of sale – accountability to accumulating and paying VAT sits with {the marketplace}: not the person vendor.

For business-to-business gross sales (B2B), low-value imports made by UK companies the next applies:

• VAT doesn’t should be charged on the level of sale so long as the next apply:
  • The client is a UK registered enterprise
  • The products are purchased from one other enterprise which is abroad
  • You import these items into the UK
  • The cargo is price lower than £135

Import VAT guidelines

• VAT on imports is usually charged on the identical fee as for home gross sales within the UK
• You possibly can often self-account for import VAT in your VAT return through the use of Postponed Import VAT Accounting. This implies you don’t want to pay the VAT upfront after which get better it
• You have to have an EORI quantity and embody your VAT registration quantity on any customs declaration and choose to make use of Postponed Import VAT Accounting
• If you’re not registered for VAT, or the products will not be for enterprise use, you should pay import VAT and can’t reclaim it

Avalara’s Information to UK Postponed Import VAT Accounting is a useful reference to ensure you have all that you just want.

Customs Responsibility

For companies based mostly in Nice Britain, Customs Responsibility applies in instances the place the full worth of the consignment (not every particular person merchandise) is valued at greater than £135 getting into from wherever outdoors the UK. For companies in Northern Eire, Customs Responsibility applies for items getting into from outdoors the UK and the EU.

The charge can vary from 0-25 per cent relying on the classification and origin of the products you’ve purchased.

Right Classification to your items

To assist ensure you are paying the right fee of customs responsibility in your imports, you want to pay attention to the right commodity codes (also called Harmonized System (HS codes). These codes are designed to ensure the right fee of tax is being paid in addition to to assist hold items flowing freely throughout borders.

>See additionally: The important information to commodity codes and HS classes

Harmonized System codes

Harmonized System (HS) tariff codes are used globally for the uniform classification of products and because the foundation for Customs tariffs and responsibility internationally. Each 5 years, the World Customs Group (WCO) critiques and updates HS codes so it’s vital these are recurrently reviewed.

Commodity System codes

A commodity code is the EU and UK customized’s HS tariff code system to categorise items being imported. You’ll be requested for a commodity code to your customs declaration to work out the speed of responsibility you might want to pay.

You need to use the UK authorities on-line Commerce Tariff service to lookup commodity codes. This tariff additionally units out the Import VAT fee too.

Whether or not you’re an importer, exporter or concerned in cross-border transactions, you will want to make use of the best codes to your merchandise to pay the right duties and taxes. Utilizing the inaccurate codes can value your online business cash.

Guidelines of origin

The EU and UK have agreed a system of nil or preferential customs duties (tariffs) for items that adjust to the ‘guidelines of origin’ from 1 January 2021 of their Commerce and Cooperation Settlement. This implies for many items shipped between the EU and GB (and vice versa), there may be zero customs responsibility levied if merchandise have been largely produced and manufactured within the EU, or GB the place items are offered into the EU.

For the principles of origin to use, items should largely originate from the respective nations. Proof of the origin and claims in customs declarations have to be made to assist this. Importers have to be additionally in a position to correctly classify items with UK and EU commodity codes. Failure to adjust to this may imply EU or UK import tariffs will nonetheless apply.

At present most items imported between EU and UK are nil rated for customs duties. Customs fees shouldn’t be utilized to merchandise of EU origin, as a result of guidelines of origin settlement between the UK and the EU.

Excise Responsibility

Excise Responsibility designed to restrict the consumption of merchandise which might be seen to be damaging to the surroundings or to customers’ well being (for instance, alcohol, tobacco, or gas merchandise).

Plastic Packaging Tax

There’s a world development for governments to introduce inexperienced and ecotaxes to advertise sustainability, encourage recycling and cut back air pollution and waste. The UK launched on 1 April 2022, Plastic Packaging Tax (PPT) that applies if items comprise a higher weight of plastic than another part. This might embody drinks bottles, bubble wrap and bin luggage.

The right way to pay import responsibility

If you might want to pay customs responsibility, the fee course of is often dealt with by the freight agent, courier or supply service dealing with your items. They need to contact you to clarify how a lot is due and your fee choices.

In case your buyer is a shopper (B2C) and Import VAT and customs responsibility hasn’t been paid on the border already, they are going to be contacted by Royal Mail, Parcelforce or your courier firm and introduced with a invoice stating precisely which charges they should pay to obtain the products.

They’ll usually maintain the products for round three weeks. In case your buyer has not paid the invoice by then the products will likely be returned to sender.

Declare import responsibility VAT or customs responsibility refund

You could possibly defer, droop, cut back or reclaim VAT on items you import. As an example, for those who’re VAT registered you may declare VAT again on items you’ve imported with an Import VAT certificates C79. The place you have got opted to make use of PIVA, you’ll reclaim the VAT within the VAT return whenever you account for the Import VAT. The reverse cost will produce a zero internet impact within the VAT return.

The place you have got offered items to UK customers and the products have been imported from outdoors the EU and are beneath £135, as VAT would have been charged on the level of sale (and never on the border), this VAT may be refunded to the shopper and the enterprise by means of the difficulty of a credit score notice which is then processed by means of the VAT return.

You could possibly declare a refund from HMRC for instance for those who’ve paid the flawed quantity of responsibility or rejected imported items.

In search of a refund on the VAT and import fees paid could also be tough although. To assert a refund on customs duties for items that you’ve returned you’ll must fill out totally different customs types based mostly on the courier that delivered your gadgets:

Obtain and fill in:

• type BOR 286 if Royal Mail or Parcelforce delivered the products
• type C285 if a courier or freight firm delivered the products

Sadly, it’s unlikely it is possible for you to to reclaim courier dealing with charges or the price of sending items again for those who’ve paid to gather them.

In abstract, hold good compliance data for all of your imports that will help you with customs responsibility or if you might want to reclaim the products.

Alex Baulf is senior director of world oblique tax at tax compliance resolution Avalara

Additional studying

Import information: three important ideas and all the things you might want to know