If you import goods from overseas to the UK, you’ll need to pay and account for VAT according to specific rules.
These rules can be complex, and many of them have changed since the UK left the EU, so it’s important to make sure you know where you stand.
How does VAT apply to imported goods?
When you import goods to the UK, you’ll need to tell HMRC and pay any import VAT that’s due.
Prior to Brexit, this only applied to imports from countries outside of the EU. Since 1 January 2021, it applies to any goods you import from outside the UK into England, Scotland or Wales.
It also applies to goods you import from outside of the EU to Northern Ireland. As Northern Ireland is still part of the single market, EU imports there won’t incur import VAT.
Import VAT applies to all goods worth more than £135.
What rate is import VAT charged at?
If your business is VAT-registered in the UK, your goods will normally be charged at the same rate as if they had been supplied in the UK.
That means you’ll be charged a 20% standard rate, 5% reduced rate, or 0% rate depending on the type of goods you’re importing, while some goods might be exempt altogether.
You might also be entitled to a special reduced rate of VAT if you’re importing works of art, antiques or collectors’ items.
How to account for VAT on imports
You can use two main methods to account for import VAT: either paying at the point of importation, or using postponed VAT accounting.
If you pay VAT on importation, you can then reclaim the VAT subject to the normal rules, using an import VAT statement as evidence.
Most businesses, however, will choose to use postponed VAT accounting, which allows you to declare import VAT and recover it on your VAT return.
This is similar to the reverse charge scheme that was previously used for trading with the EU before Brexit.
This offers cashflow benefits compared to having to pay VAT immediately and reclaim it later. It also means you avoid having your goods held in customs until your VAT bill is paid, and helps to simplify the process.
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We’ve only scratched the surface of import VAT rules here – there are various other requirements to meet in different situations, such as temporarily importing goods, importing when you’re not VAT-registered, trading between Northern Ireland and Great Britain, and so on.
You’ll also need to take into account customs and excise duties if you’re importing goods.
We can explain how the rules apply to you, as well as advising on the best accounting method for your situation and processing your VAT returns.
Talk to us about accounting for imported goods.