RECLAIMING IMPORT VAT IN THE UNITED KINGDOM

Goods imported into the UK from abroad must be cleared for customs when they reach the UK’s borders (i.e. International Airports or Sea Ports). The customs declaration is usually handled by an appointed carrier, freight forwarder or customs broker and normally gives rise to the payment of import duty and taxes, except when the foreign importer is registered for VAT purposes in the UK and thus can take advantage of the import VAT deferment scheme in force in the country.

Let us remind that a customs duty is applicable only when the value of the consignment is greater than £135 while import VAT is charged on commercial consignments of any value. The import VAT exemption that used to be applicable on small consignments valued at £15 or less has been removed since January 1, 2021.

Therefore, for consignments valued at £135 or less that are sold and shipped directly from abroad to UK consumers, the foreign seller must register for VAT in the United Kingdom and charge UK VAT at the point of sale (i.e. when the orders are placed on its own website). There are different rules when importing goods in the UK and selling them through an online marketplace.

When a DDP term (Delivered Duty Paid) is used for the shipment of a consignment to the UK, the carrier will generally advance the payment of import duty and VAT to the UK tax authorities (HM Revenue & Customs) and will send the corresponding invoice to the shipper. The latter can reclaim import VAT incurred in the UK if certain conditions are fulfilled.

Before you read further, please note that the first key condition to reclaim import VAT in the United Kingdom is to hold a C79 VAT certificate or a customs clearance document (Form C88) displaying the name of your foreign company as the Importer of Record (IOR) at destination. Using the name of another company as the Importer of Record (also known on the market as “IOR services”) may lead to a permanent loss of your right to reclaim import VAT. You should therefore apply for a UK EORI number starting with the letters “GB” in order to be able to act yourself as the Importer of Record. Secondly, your foreign company should be the owner of the goods imported into the UK for business purposes.

• What is a DDP shipment to the UK ?

• How import duty and taxes are charged in the UK ?

• Can my company reclaim import VAT charged in the UK ?

• Is VAT refundable when the goods imported in the UK are not sold ?

• What are the requirements for import VAT refund in the United Kingdom ?

• Which countries have a VAT refund reciprocity agreement with the UK ?

• How long does it take before receiving VAT refund in the UK ?

• Further help or advice ?

A. What is a DDP shipment to the UK ?

DDP or Delivered Duty Paid refers to shipments where the shipper (the overseas company not established in the United Kingdom) delivers goods sourced from another country to their final destination in the UK, but already cleared for importation.

The overseas company bears all landed costs, including transportation charges, import duty and VAT levied on the goods by the UK Customs Authorities.

B. How import duty and taxes are charged in the UK ?

When sending a Delivered Duty Paid (DDP) parcel in the UK, an overseas company handles the shipment to a carrier or a fast parcel operator such as FedEx, DHL or UPS, to name but a few. The latter arranges customs clearance in the UK in the name and on behalf of the shipper.

The freight forwarder or carrier pays in advance the duty and taxes to the UK Customs and returns to the shipper an invoice corresponding to import taxes prepaid.

C. Can my company reclaim import VAT charged in the UK ?

YES! But clearly note that your company should be the owner of the goods imported into the United Kingdom for business use. Your foreign company should also act as the Importer of Record (IOR) in the UK by using its own GB EORI number for customs clearance purposes. The EORI number has to be displayed on the shipping documents.

A prior VAT registration of your company in the UK will be also required in most cases.

D. Is VAT refundable when the goods imported in the UK are not sold ?

Even if your company is not selling the goods you are bringing into the UK (i.e. there is no transfer of ownership immediately after the customs clearance), you can still reclaim import VAT provided that certain legal conditions are fulfilled. Below are few examples of flows where the goods imported into the UK could be eligible for VAT refund :

1- You’re shipping goods into the warehouses of an Online Marketplace facilitating your B2C sales in the UK
2- You’re shipping medicines (Investigational Medicinal Products) for clinical trials in the United Kingdom
3- You’re shipping computer networking equipment into a data centre in the UK (colocation service)
4- You’re shipping goods for storage in the United Kingdom under a consignment sale agreement
5- You’re shipping a machine or an equipment to be incorporated into a plant built in the UK
6- You’re shipping an equipment or device into the UK for rental or leasing purposes
7- You’re shipping an aircraft engine or heavy machine parts into the UK for (or after) maintenance works

E. What are the requirements for import VAT refund in the United Kingdom ?

In any of the cases listed above, please note that all the following conditions should be fulfilled:

• The overseas company should get a GB EORI number issued by HMRC (the UK Customs) and act as the Importer of Record (IOR) in the United Kingdom. The average time for an EORI registration in the UK is 1 week or less.
• The overseas company willing to reclaim VAT in the United Kingdom should be a taxable person in its home country. A certificate of status issued by your local tax authorities will be required.
• The amount of import VAT to be reclaimed represents at least £130 GBP for the prescribed period.
• The VAT refund application and the relevant documents have to be submitted to the British Tax Authorities no later than 6 months after the end of the ‘year of reference’ in which import VAT was incurred. The year of reference is the 12 months from 1 July to 30 June of the following calendar year and the application should be submitted no later than 31 December.

F. Which countries have a VAT refund reciprocity agreement with the UK ?

All the overseas companies, without any restriction related to the country of incorporation, are eligible to reclaim import VAT in the United Kingdom. However, the country of the claimant should be offering similar concessions to UK companies in respect of its own sales tax system.

G. How long does it take before receiving VAT refund in the UK ?

The UK tax authorities examine each claim and make a decision within 4 to 6 months after having received the VAT refund application and all the requested documents. We remind you that this is an average timescale provided for your information only. The Commissioners of HMRC can decide to run a further investigation on a specific claim and will send to the applicant a letter of inquiry.

H. Further help or advice ?

If you have an inquiry about the possibility of reclaiming import VAT paid in the United Kingdom, feel free to send us a message using our email address displayed on the contact form or call us by dialing +33-261-536-544.

The content published here above is based on information timely as of 30 August 2024, unless otherwise indicated. Amendments to the tax laws in the country covered here could have been passed recently. Therefore, readers should contact Corintax Consulting for further insights.