What is Import VAT?

Import VAT is the tax you pay on all goods purchased from any country outside the UK.

When running a business you may not want to limit yourself to just having customers in the UK, or maybe another country can provide services that work better for you.

It is normal for a business to do this, however as Value Added Tax (VAT) is different in other countries this can affect how you account for it and complete VAT returns.

Previously we looked at the VAT effect of exporting to other countries. In this blog, we will be looking at importing goods from other countries and what VAT is due on those imports.

Importing goods from the EU and EU customers

If you are registered for VAT and receive goods from another country in the EU, you will normally have to pay import VAT. The import VAT is charged at the same rate as when you purchase the goods from a business in the UK.

This VAT is also known as acquisition tax and can normally be reclaimed if the goods imported are related to the goods you sell. If you are not registered for VAT and import goods totalling more than £85,000 in twelve months, you will need to register for VAT.

The acquisition tax is recorded in box two of the VAT return. If you can reclaim the tax you would also record it in box four along with the VAT on purchases. The net figure of the import value will be recorded in boxes nine and seven.

Importing goods from non-EU customers

If you import goods from a country outside of the EU there will still be acquisition tax to pay at the normal VAT rate. There are exceptions for services that normally pay VAT at a lower rate which will have acquisition tax charged at this rate instead.

You can still reclaim the acquisition tax as you would for imports from EU countries, however, you will need an import VAT certificate or form C79 as proof of purchase. Shipping or forwarding agents cannot usually reclaim this tax as the goods are not imported to be used in the business.

Services received from overseas suppliers

When you buy services from another country, you may have to account for the acquisition VAT yourself. This is known as a reverse charge or tax shift. You charge the VAT to yourself (providing the services are related to the VAT taxable service or goods you supply) and reclaim the tax back. This effectively causes the tax to cancel itself out.

The VAT for a reverse charge is recorded in boxes one and four while the net amount is recorded in boxes six and seven.

What if I am not registered for VAT?

If you are not registered for VAT you will still have to pay the acquisition tax, however, you will not be able to claim it back.

You can find more information on imports as well as rules for additional scenarios by clicking this link. If you would like more advice or assistance with the above, or with VAT in general, please do not hesitate to contact us.