If you import goods into the UK, you will generally be liable for import VAT. Following Brexit, that is also the case for companies based in the EU. Previously UK-EU trade was not subject to import VAT or customs duties.
Import VAT and customs duties pose a significant additional cost on imports. They also create cash flow pressure, as these additional costs are often paid at the point of entry.
Fortunately, importers can take advantage of mechanisms that overcome these issues. In order to do so, however, they need to register for UK VAT.
Registering for VAT obviously creates certain obligations, such as the requirement to file regular VAT returns. However, for many importers, the benefits will outweigh the inconvenience. Moreover, a professional VAT service can manage VAT registration and compliance on your behalf.
Reclaiming import VAT
The good news is that you can reclaim import VAT. In order to do so, you should register for UK VAT. Traders based in the UK that are not VAT registered will still be liable to pay import VAT, but will not be able to reclaim the VAT.
On the other hand, if you are an overseas trader that is not registered for UK VAT, you will have to appoint an agent to import the goods and on your behalf.
In short, if you are the entity that is responsible for paying import VAT, you must be registered for UK VAT.
Postponing import VAT
By default, importers who are liable for import VAT will pay the VAT at the point of entry. That is, you must pay import VAT at the border when bringing in a consignment.
However, you can choose to take advantage of a mechanism known as postponed VAT accounting. Postponed VAT accounting is an effective way to overcome the cash flow consequences of having to pay import VAT up front.
Instead, the mechanism enables you to account for VAT on your VAT return. As your input VAT and output VAT balance out, you will have ‘paid’ your import VAT without actually making a physical payment.
In order to take advantage of the import VAT deferment, you must be registered for UK VAT.
Customs duty deferment
Companies that regularly import into the UK may find it more efficient and convenient to consolidate their duty payments, instead of paying customs duties up front for each import. To do so, you need to create a duty deferment account. When taking advantage of duty deferment, you will be required to account for your import VAT via import VAT deferment.
Making VAT compliance simple
VAT compliance is complex at the best of times. It’s even more complicated when you have obligations in multiple countries. Vatglobal’s world class VAT team, supported by our powerful compliance technology, makes VAT compliance simple, easy and efficient.