COUNTRY TAX PROFILE: UNITED KINGDOM
Goods imported into UK from a non-EU country must be cleared for customs when they reach the UK’s borders (International Airports or Sea Ports).
The customs declaration is usually prepared and filed by an appointed carrier or freight forwarder. This procedure gives rise to import duty and taxes levied by the Customs Authorities. Let us remind that import duty is levied on a good having a minimum value of £ 105 and import VAT is due on a product valued at least at £ 15. Small goods with a value under the mentioned thresholds are exempt of duty and taxes, except in case of mail ordering.
In the course of international commerce, it is the recipient or the consignee of the cargo which usually pays the customs taxes in the country of arrival.
However, the competitive pressures of the market or issues related to the ownership of the goods can justify, in certain circumstances, that the foreign shipper bears import duties and taxes in UK. In such a case, we talk of a shipment or a sale under DDP terms (Delivery Duty Paid).
A. What is a DDP shipment to UK ?
DDP or Delivered Duty Paid refers to shipments where the shipper (the overseas company not established in UK) delivers goods sourced from a non-EU country to their final destination in UK, but already cleared for importation.
The overseas company bears all landed costs, including transportation charges, import duty and taxes levied on the goods by the UK Customs Authorities.
B. How import duty and taxes are charged in UK ?
When sending a Delivered Duty Paid (DDP) shipment to UK, an overseas company handles the shipment to a forwarding agent like FedEx, DHL or UPS, to name but a few. The latter arranges customs clearance in UK in the name and on the behalf of the shipper.
The freight forwarder or carrier pays in advance the duty and taxes to UK Customs, and returns an invoice corresponding to the taxes prepaid to the shipper.
C. Can my company reclaim import VAT for DDP shipment to UK ?
YES! But a prior VAT registration of your company in the UK may be required.
D. What alternative means can we use to reduce import VAT burden in UK?
Some overseas companies are reluctant to register for VAT in United Kingdom because they do not want to charge local VAT to their UK customers, offering them in this way a real advantage in terms of cash flow.
Such foreign suppliers can chose to use the “Single Point of Clearance”, a procedure available for exports to EU countries. This special customs scheme allows exporters to recover import VAT paid on a DDP delivery into UK, while offering to their clients the benefit of VAT exemption on their purchases.
For further details on this special procedure, feel free to contact us or read the outlines of Single Point of Clearance as a tax reduction scheme.
E. Is VAT refundable when the goods imported into UK are not sold ?
If your company is not selling goods imported into UK (i.e. there is no transfer of ownership), it can recover import VAT provided that certain legal requirements are met.
The following cases are concerned:
- Goods imported for international tradeshows or exhibitions (i.e: Temporary Importation)
- Commercial samples of negligible value and goods imported for examination, analysis or test
- Goods imported for repair, alteration or processing (i.e: Inward Processing Relief)
- Goods imported under a hire or leasing contract (e.g: Equipment Lease Agreement)
- Goods imported for warehousing before sale (e.g: Storage for e-commerce purposes)
- Goods imported as technical equipment (e.g: Measuring instruments)
In any case, please note that all the following conditions have to be fulfilled:
- The overseas company (the shipper) should be the Importer of Record (IOR) or the “recipient” on the Customs document issued in UK. To read more on the IOR requirements, please go on Prepare your shipment.
- The overseas business reclaiming import VAT refund (the shipper) is a taxable person in its country of incorporation. A Tax certificate proving this status will be required.
- The amount of VAT for which a refund claim will be introduced represents at least 130 GBP for non-EU companies and 295 GBP for EU based companies.
- A VAT registration in the UK may be required before starting to import in the country. The average registration time limit is 6 weeks.
- For direct VAT refund claim (without a VAT registration in UK), the relevant documents have to be submitted to the British Tax Authorities no later than September 30th of the year following the year of importation (for companies established in EU) or December 31st of the year following the year of importation (for non-EU based companies). Caution: for non-EU based companies, the reference year is July 1 to June 30.
F. Which countries have a VAT refund reciprocity agreement with UK ?
Every overseas company, without any restriction related to the country of incorporation, is eligible to recover import VAT in UK, provided that the claimant’s own country allows similar concessions to U.K. traders in respect of its own turnover taxes.
G. How long does it take before receiving the VAT refund in UK ?
In UK, the Tax authorities investigate on each case and make a decision within 4 to 6 months after having received all the documents requested. We remind you that this is an average time limit provided for information purposes only.
H. Further help or advice ?
The content published here above is based on information timely as of 1 January 2014, unless otherwise indicated. Amendments to the tax laws in various EU countries covered here could have been passed recently. Therefore, readers should contact Corintax Consulting for further insights.