How Much is Import VAT in the UK?

When goods are imported into the UK, import VAT becomes due. This is charged at the same rate as if the goods were purchased in the UK and calculated based on the value declared at import. For example, if goods are standard rated when purchased from a UK VAT registered supplier, import VAT will be due at 20% when these goods are imported into the UK from abroad. 

What is import VAT?

Import VAT is charged when buying goods from countries outside of the UK and becomes due when the goods arrive at the relevant UK port. It is calculated on the value declared on the import declaration, this can include:

• The value of the goods purchased
• Shipping costs
• Handling costs
• Duties and levies

When to pay import tax

Import VAT becomes due when the shipment arrives at the UK port of entry. However, UK VAT registered businesses can utilise postponed VAT accounting and defer the initial payment of VAT, instead accounting for import VAT on the businesses VAT return, avoiding a negative cash flow situation.

Do I have to use postponed accounting?

PVA is optional, and you can choose to pay the import duty on arrival if you would prefer. Accounting for VAT under Postponed VAT accounting does not affect the amount of VAT due or recoverable, it solely affects when, and the means by which, this is accounted for. Should you wish to utilise PVA, please consult a VAT professional for information on its operation, and how it is reflected on the business's VAT return.

VAT on services

A common question we are often asked is, 'Do you have to pay import tax on services purchased from outside of the UK?'. Import VAT applies solely to goods, however this does not mean that there are no UK VAT implications when purchasing services from overseas.

Where VAT is due on a supply of services purchased from abroad is determined by the ‘place of supply’ rules. The place of supply will determine where a supply is subject to VAT and is dependent on the status of the parties involved (whether they are businesses or consumers), their location, and the specific services involved.

When a UK VAT registered entity purchases services from abroad and the place of supply is the UK, these may be accounted for using the reverse charge mechanism. This would involve the UK purchaser self accounting for VAT on their VAT return – declaring the relevant amount as an output AND an input.

UK customs duty

UK customs duty is charged on goods that are imported from outside the UK that are excise goods or have a value of more than £135.

Excise goods include:

• Alcohol-based products including wine, beer, cider, and spirits
• Cigarettes
• Tobacco, cigars and chewing tobacco
• Mineral oils

UK customs duty is calculated on the value of the product and the cost of posting, packaging, and insurance. Due to the UK’s exit from the European Union, customs duties may be due on goods arriving from the EU – depending on their origin - in addition to those received from the rest of the world. As such, you may wish to consider potential duty saving strategies to minimise the impact this has on your business. Please consult The Customs People for advice in this regard.

Excise duty

Excise duty is paid for goods such as alcohol and tobacco that are purchased from outside the UK. The current rates for excise duty can be checked on the GOV.UK website. If you receive a large import of alcohol or tobacco for your business, you should check the duty rates via the Trade Tariff page on the Government website.

Keeping records in relation to imported goods

To facilitate the recovery of import VAT, you will require either a C79 import VAT certificate (when import VAT is paid at import) or a postponed VAT statement (when import VAT is deferred and accounted for on the businesses return). This the only acceptable evidence for import VAT recovery – an invoice from your freight forwarder is not sufficient for these purposes. Without this evidence you cannot recover import VAT.

It is advisable that copies of import documentation are also retained – this can be sourced from your courier/freight agent.