Businesses related to imports of goods and products might have been familiar with import VAT rules in the UK.
These set of rules apply to you if you are dealing with a supplier in another European Union country or with other non-EU countries.
In either case, you must make sure that you pay the right amount of VAT. If you are importing from outside the EU, you may also need to pay import duty.
To make these things more transparent, first, let’s know ‘What is import VAT’ in more details,
In general terms, import VAT is a tax paid on goods purchased from another country outside the European Union (EU).
It is applicable only to goods coming from countries outside the EU.
If you purchase goods from non-EU countries, then you may also need to pay Customs Duty if the worth of the good is over £135 (as of September 2018).
Currently, import VAT charge is applied to all purchased goods worth more than £15; all gifts worth more than £40; and all goods, regardless of value, which is sent to the UK from the Channel Islands.
Visit Gov.uk to know how to calculate import VAT and duty that would be charged for importing goods from the non-EU country.
What is the VAT rate on imports?
The VAT rate on imported goods depends on whether your business is VAT registered.
If your business is registered, you’ll pay the import VAT at the same rate which would typically apply when you purchase goods within the UK – 20% normally.
The import VAT charge is paid on the total amount determined for a shipment: the value of the goods, the shipping & handling costs, as well as any levies or duties that can be applied.
Businesses that are registered for VAT should record Import VAT in their VAT Return. Import VAT can usually be reclaimed in the same way as VAT on domestic purchases.
Import VAT on services
There’re a number of steps that should be followed, for tax on services sourced from countries outside the UK.
However, this can be applied to services from non-EU countries, as well as EU countries.
If you’re purchasing services from outside the UK, you should follow a procedure known as ‘tax shift’ or ‘reverse charge’.
Purchase of goods from within the EU
The import and purchase of goods from within the EU are called as ‘acquisition’.
Such goods are subject to VAT payment as an intra-EU purchase; however, you can claim it back in VAT return as long as you are VAT registered.
Intra-EU goods are not subject to import duty.
As of 1st January 2021, the import VAT rules are changing, read on to know more in details,
Recent changes to import VAT
HMRC has outlined several changes to the VAT treatment of imported goods which will apply from 1st January 2021.
These changes will ensure that goods from non-EU and EU countries are treated in the same way, and UK businesses are not disadvantaged by competition from the VAT-free imports.
From 1st January 2021, the current VAT exception for sales of goods under £15 will be removed, and VAT on imported goods value of up to £135 will be collected at the point of sale opposed to the point of importation.
This means that UK supply VAT rather than import VAT will be due on goods.
Online marketplaces like Amazon, eBay etc. involved in facilitating the sale of imported goods will be fully responsible for collecting and accounting for the VAT as per new rules.
In addition, B2B sales not exceeding £135 in value will also be subject to these changes of rules.
However, if the business customer is VAT registered in the UK and provides its valid VAT registration number to the seller, then they can self report UK VAT through their VAT return.
As we can see, import VAT is crucial if your business is importing goods and products from other countries, in addition, you also need to be up to date because of changes in rules and regulation. In such a case, it is always beneficial to have an accountant on board who can guide you through the procedure and save your time.