Recent Changes to Import VAT in The UK

Companies involved in the imports of products and goods might be familiar with the tax rules for import VAT throughout the UK. These rules will apply to you if working with a supplier from the same. European Union country or with other countries that are not part of the EU. In any case, you should ensure you are paying the appropriate quantity of tax. If you import from outside of the EU and you are not in the EU, you might have to pay duty on imports.

To make this clearer take a look at ‘ What is import VAT’ in more detail,

Import VAT

In simple terms, Import VAT is a tax imposed for goods bought from a country, not within EU member countries. It only applies to products that originate from countries other than the EU. If you buy goods from countries outside the EU. You could also be required be pay Customs Duty in the event that the value of the item is greater than PS135 (as of September 2018).

At present, the VAT charged for imports is charged to all products that are worth greater than PS15 or all gifts of more than PS40 and also all items regardless of value that are shipped into UK from the Channel Islands. Go to know how to calculate the import VAT and duty to be imposed for the import of products from a non-EU country.

What is the VAT rate on imports?

The rate of VAT on imported products is based on the VAT status of your company. It’s mean is your business VAT registered. If your company is certified, it will be charged the VAT on imports in the exact same amount that normally applies when purchasing goods from the UK typically 20%.

The VAT charged for import is based on the amount total for the shipment: the amount of the product and the handling charges and any duties or levies which may be imposed. Companies that are VAT-registered must record the Import VAT on your VAT returns. Import VAT can generally be recovered in the same manner when purchasing domestic goods.

Purchase of goods from within the EU

The purchase and importation of goods within the EU are called ‘acquisition’. The goods you purchase are tax-exempt for purchases made within the EU; However, you are able to claim the VAT back in the form of a VAT return if you’re VAT-registered. Goods imported into the EU do not have to pay duty on imports.

Since 1 1 Jan 2021, the VAT on imports rules have changed

Recent changes to import VAT

HMRC has announced a number of modifications to the tax treatment of imports which will be in effect starting 1 Jan 2021. The changes will ensure that the goods of countries outside the EU. EU states are treated the same manner, and UK firms are not affected because of competition from VAT-free imports.

Starting 1 January in 2021 VAT exemption for the sale of goods priced less than PS15 will be eliminated. VAT on import items with a value between PS135 and PS135 will be paid at the time of sale. Not at the point of importation. This means UK supply VAT, rather than the import VAT is charged on products.

Furthermore, B2B sales not exceeding PS135 in value will become subject to the modifications of regulations. If the business client is registered for VAT within the UK and has provided the correct VAT number and registration to the retailer then they may self-report UK VAT on their returns for VAT.

Final Thought

As you can see, import VAT is essential for businesses that import goods and services from other countries. In addition, you need to stay current because of the changes in the rules and regulations. In this case, it’s always advantageous that you have someone with accounting experience with you who will help you navigate the process and help you save time.

Fin-eX Outsourcing

Fin-eX Outsourcing can help you manage all aspects of your accounting, VAT, VAT return and financial activities. With Fin-eX, you will get the expertise and power of a fully-fledged accounting department without hiring an in-house accounting department. We take the tedious tasks and turn them around in a timely and efficient manner. So you can concentrate on analyzing the data and give a better quality of service.