VAT on imported goods

Hugh_Jampton_2

If a VAT registered business imports goods from outside the EEC and then sells them within, can it import the goods VAT free?

What I mean is that a private individual has VAT collected by Parcel Farce or whoever. However, a business will be charging VAT on selling them.

How does it work?

Petmidget

No, imports from inside EU can be zero rated but outside the EU they have vat and import duty charged at entry.

The vat is reclaimable as normal if you are a registered trader.

As a point the import duty is also reclaimable if the goods are re exported outside the EU.

Speak to a freight fowarder to find out how it would work for you.

As a note if the vat charge will cause cashflow difficulty you can buy duty bonds which finance the vat and dutydue until you can sell the goods.

Hugh_Jampton_2

So..on entry you pay the VAT and then claim it back? Or can you only claim it back once you have then sold the goods on and paid more VAT?

Petmidget

You pay it at point of entrym before the goods are released to you. How that works depends on the method by which they enter the country.

You then claim it on your next vat return.

I only mentioned bonds as a lot of goods imported will be used in manufacturing and the time between buying the item and selling it could be significant.

Hugh_Jampton_2

Oh...OK, so the net result is that you only charge VAT on selling.


Normally though, (privately), if I import from the USA, I pay for the product, + shipping, then import duty on the product plus shipping, then VAT on the lot. If it works the way you say, I just handle 17.5% of the sale price?

buglawton

You got it right: Pay for the product, + shipping, then import duty on the product plus shipping, then VAT on the lot at point of entry into the UK. The forwarder will bill you for the lot and pay it to customs for you.

Assuming you are VAT registered then you can reclaim the VAT component of the above but of course have to charge your customers 17.5% VAT on the selling price.