RECLAIMING IMPORT VAT IN THE UNITED KINGDOM
This article is for non-UK companies shipping goods into the UK under DDP (Delivered Duty Paid) terms and paying import VAT charged by the Customs at destination. The said goods are shipped for business purposes and belong to the foreign entity who also acts as the Importer of Record (IOR) 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 gives rise to the payment of import duty and taxes.
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.
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 an 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.
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 the 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.
D. Is VAT refundable when the goods imported in the UK are not sold ?
If your company is not selling the goods you are bringing into the UK (i.e. there is no transfer of ownership), you can still reclaim import VAT provided that certain legal requirements are met.
Examples of cases where the goods imported into the UK could be eligible for VAT refund:
1- You’re shipping medicines (Investigational Medicinal Products) for clinical trials in the United Kingdom
2- You’re shipping computer equipment to a data centre in the UK (colocation service)
3- You’re shipping a machine to be incorporated into a plant built in the UK
4- You’re shipping a device to the UK for leasing purposes
5- You’re shipping aircraft or boat parts in the UK for maintenance works
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.
E. 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.
F. 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.
G. 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 (our email address is displayed on the right side of the contact form) or call us by dialing +33-261-536-544.
The content published here above is based on information timely as of 1 January 2021, 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.