Post-Brexit issues with Import VAT

It is approaching six months since Brexit and many businesses have now completed their first post-Brexit VAT return. This has highlighted a number of issues relating to the payment of import VAT, or rather the lack of payment, on imported goods.

For most imports of goods into Great Britain from outside the United Kingdom, Import VAT should be payable. If the goods are zero-rated, e.g. books, many food items, no import VAT will be due and there are special rules for consignments valued at £135 or less.

We have seen a number of examples of high value goods arriving from EU suppliers where no Import VAT has been paid. On the face of it this may not seem a bad thing but HMRC will not share this view and if import declarations are not made as required, this may cause problems.

There are a number of ways goods can pass through customs without import VAT being paid:

• A temporary relaxation is in place for goods arriving from the EU which does not require HMRC authorisation. This allows the import to be recorded in the records of the GB business (the customer) with the import of the goods being declared made to HMRC within 175 days of their arrival. If a customer’s GB EORI number is given the goods can be cleared through customs with no import VAT payment. The customer has to make arrangements to declare the import to HMRC and pay any duty or VAT due. VAT registered customers have to declare the import VAT on their VAT return covering the date the goods were imported.
• The declaration to HMRC would normally be done using an import or customs agent as it requires specialised software and access to HMRC systems.
• It has become apparent a number of overseas suppliers are using this method to get goods through customs without making this clear to their customer.
• Where the GB customer is VAT registered it is possible to postpone the payment of import VAT. The import VAT is paid and reclaimed (subject to the normal rules) through their VAT return. The VAT registered business has to download postponed import VAT statements which show the VAT values to be entered on their VAT return.

Again, we have seen several examples where the postponed VAT accounting procedure has been used, but customer has not been informed. It is only when the HMRC system was checked that postponed import VAT statements were discovered.

If your business has imported goods valued at over £135 but has not paid any import VAT now is the time to investigate the reasons why. If the deferred declaration option has been used the declaration to HMRC will soon be due. Check the HMRC system to see if there are postponed import VAT statements (Get your Import VAT statement here) or contact your supplier or import agent to ask how Import VAT has been handled.

If import VAT has been paid on an importation it is important to make sure the appropriate evidence is held if the Import VAT is to be reclaimed. In most cases this will be an Import VAT Certificate (which has C79 in the bottom left-hand corner). HMRC issue the certificate by post in the first half of the month following importation of the goods. If import VAT has been paid but no certificate has been received it is worth checking why not.

If you would like us to review your processes speak to your normal contact at Albert Goodman or email richard.taylor@albertgoodman.co.uk.

There is a government grant scheme for small businesses to help with the cost of training or professional advice on import and export related procedures including VAT.