Import duty explained – Small Business UK

Import duty refers to a number of different taxes due on goods purchased from abroad.

In the UK, there’s no specific tax called import duty. However, if you purchase goods from abroad, you might need to pay a number of different taxes and duties, depending on the nature of the goods and where you purchased them from.

Importing, taxes, and duties

There are three main types of taxes and duties due on goods brought into the UK:

Import VAT

You may need to pay VAT on goods sent from abroad if their value exceeds a certain amount. Import VAT applies to purchased goods worth more than £135 (excluding excise goods). The usual UK import VAT rate is 20 per cent.

Post-Brexit import VAT applies to goods entering Great Britain (England, Scotland and Wales) from the EU.

Because Northern Ireland is still part of the EU VAT area, goods which enter Northern Ireland from the EU may not incur VAT.

You will have to pay VAT to the delivery company either before the goods are delivered or when you collect them.

VAT is charged on all goods (except for gifts worth £39 or less) sent from:

  • Outside the UK to Great Britain
  • Outside the UK and the EU to Northern Ireland

HMRC’s Integrated Tariff sets out the classification of goods and the rates of duty in detail.

How much extra you could be charged depends on the total value of your order, also known as the “consignment value”, it also depends on the firm you’ve bought from.

The “consignment value” is the price of the goods excluding shipping and handling costs.

In some cases, because delivery firms have paid shipping and import costs, you may be asked to pay fees by the couriers delivering your items.

If you have to pay VAT to the delivery company, it’s charged on the total package value, including:

  • Value of the goods
  • Postage, packaging and insurance
  • Any duty you owe

Import duty checklist

  • VAT on imports is generally charged at the same rate as is used within the UK
  • You can usually account for import VAT on your VAT return. This means you do not need to pay the VAT upfront and then recover it
  • You must have an EORI number and include your VAT registration number on any customs declaration
  • If you are not registered for VAT, or the goods are not for business use, you have to pay import VAT and cannot reclaim it

Customs Duty

If you receive goods worth more than £135 from abroad, you may also need to pay Customs Duty.

For businesses based in Great Britain, Customs Duty applies to goods entering from anywhere outside the UK. For businesses in Northern Ireland, Customs Duty applies for goods entering from outside the UK and the EU.

The fee can range from 0-25 per cent depending on the goods you’ve bought.

Commodity codes

You’ll be asked for a commodity code for your customs declaration to work out the rate of duty you need to pay.

You can use the government online Trade Tariff service to look up commodity codes. This tariff doesn’t include other import duties such as VAT. Commodity codes vary depending on the type and value of your goods.

>See also: The essential guide to commodity codes and HS categories

Rules of origin

Customs charges should not be applied to products of EU origin, due to the “rules of origin” agreement between the UK and the EU. This means that orders are customs duty exempt if products have been largely produced and manufactured in the EU.

Excise Duty

Excise Duty designed to limit the consumption of products that are seen to be damaging to the environment or to consumers’ health (for example, alcohol, tobacco or fuel products).

Import duty vs customs duty vs excise duty

The way you pay import duty depends on which taxes you need to pay and where the goods are being sent from.

If you need to pay customs duty, the payment process is usually handled by the courier or delivery service handling your goods. They should contact you to explain how much is due and your payment options.

Excise duty is usually considered an indirect tax, which means that the customer covers the tax by paying more for the product but doesn’t actually pay the tax direct to the relevant authorities.

How to pay import duty

You’ll be contacted by Royal Mail, Parcelforce or your courier company if you need to pay any VAT, duty or delivery charges (“handling fees”) to receive your goods.

They’ll send you a bill stating exactly which fees you need to pay.

They’ll normally hold your goods for around three weeks. If you have not paid the bill by then, your goods will be returned to sender.

Do I have to pay import VAT straight away?

If you’re not using a third party, VAT-registered businesses can account for import VAT on their VAT Return by using postponed VAT accounting. Accounting for VAT on your VAT return in this way allows you to declare import VAT and reclaim it as input tax on the same VAT Return.

Claim import duty VAT or customs duty refund

You may be able to defer, suspend, reduce or reclaim VAT on goods you import. For instance, if you’re VAT registered you can claim VAT back on goods you’ve imported with an Import VAT certificate (C79).

You may be able to claim a refund from HMRC for example if you’ve paid the wrong amount of duty or rejected imported goods.

Seeking a refund on the VAT and import charges paid may be difficult though. To claim a refund on customs duties for goods that you have returned you’ll need to fill out different customs forms based on the courier that delivered your items:

Download and fill in:

  • form BOR 286 if Royal Mail or Parcelforce delivered the goods
  • form C285 if a courier or freight company delivered the goods

Unfortunately it is unlikely you will be able to reclaim courier handling fees or the cost of sending goods back if you’ve paid to collect them.

Further reading

Import guide: three essential tips and everything you need to know

Source link