VAT on imports

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Feldjager
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VAT on imports

Post by Feldjager »

I've had a fair few PMs over the last couple of weeks asking why VAT is chargesd on imports. Here's the explanation...

Section 1(1) of the VAT ACt 1994 states that:

"1.—(1) Value added tax shall be charged, in accordance with the provisions of this Act—

(a) on the supply of goods or services in the United Kingdom (including anything treated as such a supply),

(b) on the acquisition in the United Kingdom from other member States of any goods, and

(c) on the importation of goods from places outside the member States,

and references in this Act to VAT are references to value added tax.

(2) VAT on any supply of goods or services is a liability of the person making the supply and (subject to provisions about accounting and payment) becomes due at the time of supply.

(3) VAT on any acquisition of goods from another member State is a liability of the person who acquires the goods and (subject to provisions about accounting and payment) becomes due at the time of acquisition.

(4) VAT on the importation of goods from places outside the member States shall be charged and payable as if it were a duty of customs.
"

Basically this means that you have to pay VAT on anything purchased from outside the EC (you still pay VAT in the EU, but you pay it in the country where you purchase the goods - most of the time you don't know you've paid it!).

1(4) states that VAT is effectively a duty of customs for imports and is therefore levied at the customs duty point. Don't forget they are ad valorum!

If you want to work out the full rate of duty, you need to do it like this:
1. multiply the price of the item by the customs duty rate
2. add on the cost of shipping
3. multiply by 17.5% for VAT

When working out the value of the goods, section 21 of the VAT ACt 1994 applies:

"21.—(1) For the purposes of this Act, the value of goods imported from a place outside the member States shall (subject to subsections (2) and (3) below) be determined according to the rules applicable in the case of Community customs duties, whether or not the goods in question are subject to any such duties.

(2) For the purposes of this Act the value of any goods imported from a place outside the member States shall be taken to include the following so far as they are not already included in that value in accordance with the rules mentioned in subsection (1) above, that is to say—

(a) all taxes, duties and other charges levied either outside or, by reason of importation, within the United Kingdom (except VAT); and

(b) all costs by way of commission, packing, transport and insurance up to the port or place of importation.

(3) Subject to subsection (2) above, where—

(a) goods are imported from a place outside the member States for a consideration which is or includes a price in money payable as on the transfer of property;

(b) the terms on which those goods are so imported allow a discount for prompt payment of that price;

(c) those terms do not include provision for payment of that price by instalments; and

(d) payment of that price is made in accordance with those terms so that the discount falls to be allowed,

the value of the goods shall be taken for the purposes of this Act to be reduced by the amount of the discount.
"

Hope that helps!

Dave
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Botty
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Post by Botty »

I have no real problem with paying duty/VAT on goods I import. However it does annoy me when companies add a ridiculous 'fee' to process that payment for me. Is there any way I can tell UPS/parcelforce to stuff their fee and pay direct?
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Feldjager
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Post by Feldjager »

Botty wrote:I have no real problem with paying duty/VAT on goods I import. However it does annoy me when companies add a ridiculous 'fee' to process that payment for me. Is there any way I can tell UPS/parcelforce to stuff their fee and pay direct?
Sadly, no. The shipping comapnies act on behalf of the Department to collect the duties.
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carentan
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Post by carentan »

Certain suppliers in the US are accommodating to this particular problem :wink:
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Feldjager
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Post by Feldjager »

carentan wrote:Certain suppliers in the US are accommodating to this particular problem :wink:
I know what you mean - there are a few cases, however, where items have been obtained over the internet and the value on the customs declaration put lower. These have then been identified and the duty and VAT applied based on the price on the internet/catalogue etc. - it is then up to the purchaser to prove they paid a lower price! As duties are applied ad valorum, the higher price can be applied until th lower price paid can be proven!
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pzrwest
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Post by pzrwest »

Feldjager wrote:
carentan wrote:Certain suppliers in the US are accommodating to this particular problem :wink:
I know what you mean - there are a few cases, however, where items have been obtained over the internet and the value on the customs declaration put lower. These have then been identified and the duty and VAT applied based on the price on the internet/catalogue etc. - it is then up to the purchaser to prove they paid a lower price! As duties are applied ad valorum, the higher price can be applied until th lower price paid can be proven!
If someone say from Canada was to mail a parcel to someone in England and declared it as a gift does the receiver have to pay VAT on the gift?
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Feldjager
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Post by Feldjager »

pzrwest wrote:
Feldjager wrote:
carentan wrote:Certain suppliers in the US are accommodating to this particular problem :wink:
I know what you mean - there are a few cases, however, where items have been obtained over the internet and the value on the customs declaration put lower. These have then been identified and the duty and VAT applied based on the price on the internet/catalogue etc. - it is then up to the purchaser to prove they paid a lower price! As duties are applied ad valorum, the higher price can be applied until th lower price paid can be proven!
If someone say from Canada was to mail a parcel to someone in England and declared it as a gift does the receiver have to pay VAT on the gift?
Theoretically, no but there are exceptions.
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