For non-EU businesses not used to operating within a VAT system, commencing trade with the EU can be a minefield. The EU VAT system is very different from a sales tax regime. In this article we will take a look at some important things to know when you start importing goods into the UK.
Goods entering the UK from outside the EU are treated differently from goods moving within the territory of the EU. Whereas goods in free circulation within the EU can in general be moved from country to country with minimal customs control, goods imported into the UK from outside the EU must be declared to HMRC and any import VAT and duty due paid at the time of importation.
So what do you need to know before you start importing into the UK?
- You need an Economic Operator Registration and Identification (EORI) number before you can import into the UK. Once registered for the EORI scheme in one EU Member State, theEORI number is valid throughout the EU. This number should be used in all communications with any EU customs authorities where a customs identifier is required, such as customs import declarations.
To find out more about the EORI scheme including how to apply for an EORI number see: https://www.gov.uk/eori-supporting-guidance.
It is worth noting that it can take up to 3 working days for an EORI application to be processed.
- The imported goods must be declared to HMRC. This is usually done using the Single Administrative Document (SAD), also known as form C88.
Click here to access an SAD form: https://www.gov.uk/government/publications/import-and-export-single-administrative-document-full-8-part-set-c88-1-8
- Import VAT is paid directly to HMRC on the imported goods when they’re first brought into the UK. VAT is due on the goods at the same rate as applies to a sale of those goods within the UK.
The value of the goods for the purposes of calculating import VAT should additionally include:
- incidental costs of importing the goods, such as commission, packing, transport and insurance, and
- any duties or levies (excluding VAT) payable on importation into the UK.
N.B.: it is possible to apply to HMRC for approval to defer the payment of import VAT. If approved the importer will be given a Deferment Approval Number. In this situation payment of the import VAT is deferred until the 15th of the month following importation.
- The VAT registration threshold in the UK for overseas traders is nil so if you intend to make onward sales of the goods you must register for VAT.
You can find out more about how to register for VAT here: https://www.gov.uk/government/publications/vat-application-for-registration-vat1
Non-EU businesses can if they wish choose to appoint a tax representative to deal with their UK VAT affairs on their behalf see: https://www.gov.uk/government/publications/vat-appointment-of-tax-representative-vat1tr.
- Once you are VAT registered you can reclaim import VAT paid to HMRC on your VAT Return. You will need to retain the import VAT certificate Form C79 issued by HMRC to support your claim.
You now know how to start importing into the UK, however do remember that the VAT rules on doing business within the EU are complex and can vary from Member State to Member State.
If you want to find out more, you can learn VAT import processes from our online VAT training courses or alternatively check back on our VAT blog to read more related articles.