Post by Phil on Apr 27, 2008 19:25:16 GMT
VAT, Duty and Postal Imports
I will try and cover most things. The following applies to personal imports btw, not business imports.
Basic Rules
The basic rule is that everything which gets imported to the UK will be subject to Duty, excise duty if applicable, and VAT unless certain conditions apply.
Since the formation of the EC, goods which come into the UK from an EC country are not considered "imports" but are acquisitions. There are special rules which apply to acquisitions which I will cover below. The term import now refers only to goods which come into the UK from outside of the EC.
Exceptions
Duty is waived when the duty amount is less than £7.
VAT is not payable on goods which are zero rated or exempt under UK VAT law [eg books, childrens clothing for example]
VAT only is not payable on gifts up to the value of £36.
Gifts of perfume, toilet water, alcohol or tobacco are NOT included and duty, excise duty and VAT WILL be payable on such goods.
Importing Helmets
Motorcycle helmets are zero rated under UK VAT law. However there are conditions which apply - they have to meet the British Standards requirements. If the lid doesnt, then technically it can not be zero rated on sale.
Importing a lid from abroad means the lid is unlikely to meet such standards so duty and VAT are payable on such imports.
Import Charges - Calculating the Duty
Customs duty is calculated as a percentage on the total value of goods.
The total value is calculated as:
value of goods converted to £ +
sales tax if applied converted to £ +
postage & packing converted to £ +
insurance costs converted to £.
Please note that for gifts only the postage value is omitted from this calculation.
HMRC work from a monthly exchange rate to convert to sterling, so will not apply the daily rate for that day. Bear in mind any calculation you make obtaining an exchange rate from a paper/website may not be the same so you will get a different figure. You can go to HMRCs website and get the exchange rate they use if you want to.
Importing goods for yourself:
The total value is calculated as above. The appropriate duty rate for your goods as listed in the Tariff is then applied.
Gifts over £36 and under £290:
The total value is calculated as above. The tariff is then checked.
If the goods have a % rate less than 3.5%, the tariff % is applied.
If the goods have a % rate above 3.5%, a flat rate 3.5% is applied.
HMRC will apply the lower % rate applicable.
Gifts above £290:
Same as buying goods for youself. The tariff duty rate will apply.
Import Charges - Calculating the VAT
If the goods are standard rated in the UK, they will be subject to VAT. If the goods are exempt or zero rated you will only have to pay the duty amount.
All duty is added to the total value [so if excise duty is applicable it will also be added]. This new duty inclusive amount is the total that VAT is calculated on.
For example: total of goods = £90, duty = £10, the VAT would be calculated on £100.
Admin Charges
Usually the thing most people gripe about. This is an admin/handling fee charged by the courier/delivery company. The fees vary between them and are not fixed. This is NOT an HMRC charge.
Basically the law requires all packages are required to be stored while HMRC decide which to inspect. If your package is inspected it will be opened - and HMRC do not rewrap packages. It will be returned opened with any billing documentation to the courier company. The couriers then have to rewrap it and readdress it. That is what some of the charge is for.
Will your package be inspected?
LABELLING AS A GIFT DOES NOT AUTOMATICALLY WORK AND DOES NOT GUARANTEE YOUR PACKAGE WILL GO THROUGH UNCHECKED. Its a big bugbear of mine when people post "label it a gift" as if its a guarantee. HMRC are very wise to this.
If anything, labelling as a gift is likely to increase the chances of it being checked. Due to the amount of mislabelling and tax avoidance through labelling as gift when its not is now seeing HMRC officers target gifts more.
However, if you have your supplier label gift, sample, test etc that is more likely to fall into one of the risk areas so raises the odds of your package being picked. There are criteria regarding samples/tests etc and one day your packages will be checked.
If you continue to have your suppliers mislabel and this is picked up, ultimately you may end up having your goods seized. HMRC have the power to seize goods so you may find you pay the money for nothing. Equally as the importer it is your responsibility for ensuring and duty and taxes are paid. If you are found to continually have not done this you risk arrest and a formal caution.
The reality is that you would have to be importing lots and of high value to get there but people should be aware of the consequences.
Bear in mind HMRC officers have access to the internet and can check for prices should you opt to go for the misvaluing the goods. The likelihood is you will get a bill for what the duty and VAT is. However you do run the risk of forfeiture of your goods with this too.
The reality of packages being checked is that it is totally random. It doesnt depend on the courier, it doesnt depend on the value or the goods, its more down to the volume of mail coming in and the number of staff available.
So this is why you will find some say they have a lot checked, some say 1 in 10 packages are checked, etc. Most of the time the odds are in your favour.
The bottom line though is this: when you buy your goods online, factor in the duty and the VAT and admin charge to your calculations.
If its cheaper with it and you dont get charged, you get a better bargain. If its cheaper and you get hit for the duty and VAT - then at least you expected it and budgeted for it.
If its more expensive with duty/VAT - thats your risk assessment to choose whether you want to play the odds and perhaps end up overpaying.
Buying from the EC - Acquisitions
As an individual buying from an EC supplier you will get charged the VAT rate of the country your supplier is in. Bear in mind last time I checked the UK has the 5th LOWEST tax rate - very few countries tax works out cheaper. You may find that by the time you add on 22% tax and shipping it doesnt work out any cheaper than going to your local shop tbh.
Buying from the EC as said before is NOT considered to be an import so NO duty will be applicable on it UNLESS the goods are subject to excise duty or the distance selling rules.
If you are a business and buy from the EC, if you are VAT registered you quote your reg number and the goods will be sold tax free. You then have to account for the tax and claim it here on the same return.
Official Sources
www.hmrc.gov.uk is the HMRC website which contains all the public notices/leaflets etc.
A guide for international post users is the essential info about importing by post.
I will try and cover most things. The following applies to personal imports btw, not business imports.
Basic Rules
The basic rule is that everything which gets imported to the UK will be subject to Duty, excise duty if applicable, and VAT unless certain conditions apply.
Since the formation of the EC, goods which come into the UK from an EC country are not considered "imports" but are acquisitions. There are special rules which apply to acquisitions which I will cover below. The term import now refers only to goods which come into the UK from outside of the EC.
Exceptions
Duty is waived when the duty amount is less than £7.
VAT is not payable on goods which are zero rated or exempt under UK VAT law [eg books, childrens clothing for example]
VAT only is not payable on gifts up to the value of £36.
Gifts of perfume, toilet water, alcohol or tobacco are NOT included and duty, excise duty and VAT WILL be payable on such goods.
Importing Helmets
Motorcycle helmets are zero rated under UK VAT law. However there are conditions which apply - they have to meet the British Standards requirements. If the lid doesnt, then technically it can not be zero rated on sale.
Importing a lid from abroad means the lid is unlikely to meet such standards so duty and VAT are payable on such imports.
Import Charges - Calculating the Duty
Customs duty is calculated as a percentage on the total value of goods.
The total value is calculated as:
value of goods converted to £ +
sales tax if applied converted to £ +
postage & packing converted to £ +
insurance costs converted to £.
Please note that for gifts only the postage value is omitted from this calculation.
HMRC work from a monthly exchange rate to convert to sterling, so will not apply the daily rate for that day. Bear in mind any calculation you make obtaining an exchange rate from a paper/website may not be the same so you will get a different figure. You can go to HMRCs website and get the exchange rate they use if you want to.
Importing goods for yourself:
The total value is calculated as above. The appropriate duty rate for your goods as listed in the Tariff is then applied.
Gifts over £36 and under £290:
The total value is calculated as above. The tariff is then checked.
If the goods have a % rate less than 3.5%, the tariff % is applied.
If the goods have a % rate above 3.5%, a flat rate 3.5% is applied.
HMRC will apply the lower % rate applicable.
Gifts above £290:
Same as buying goods for youself. The tariff duty rate will apply.
Import Charges - Calculating the VAT
If the goods are standard rated in the UK, they will be subject to VAT. If the goods are exempt or zero rated you will only have to pay the duty amount.
All duty is added to the total value [so if excise duty is applicable it will also be added]. This new duty inclusive amount is the total that VAT is calculated on.
For example: total of goods = £90, duty = £10, the VAT would be calculated on £100.
Admin Charges
Usually the thing most people gripe about. This is an admin/handling fee charged by the courier/delivery company. The fees vary between them and are not fixed. This is NOT an HMRC charge.
Basically the law requires all packages are required to be stored while HMRC decide which to inspect. If your package is inspected it will be opened - and HMRC do not rewrap packages. It will be returned opened with any billing documentation to the courier company. The couriers then have to rewrap it and readdress it. That is what some of the charge is for.
Will your package be inspected?
LABELLING AS A GIFT DOES NOT AUTOMATICALLY WORK AND DOES NOT GUARANTEE YOUR PACKAGE WILL GO THROUGH UNCHECKED. Its a big bugbear of mine when people post "label it a gift" as if its a guarantee. HMRC are very wise to this.
If anything, labelling as a gift is likely to increase the chances of it being checked. Due to the amount of mislabelling and tax avoidance through labelling as gift when its not is now seeing HMRC officers target gifts more.
However, if you have your supplier label gift, sample, test etc that is more likely to fall into one of the risk areas so raises the odds of your package being picked. There are criteria regarding samples/tests etc and one day your packages will be checked.
If you continue to have your suppliers mislabel and this is picked up, ultimately you may end up having your goods seized. HMRC have the power to seize goods so you may find you pay the money for nothing. Equally as the importer it is your responsibility for ensuring and duty and taxes are paid. If you are found to continually have not done this you risk arrest and a formal caution.
The reality is that you would have to be importing lots and of high value to get there but people should be aware of the consequences.
Bear in mind HMRC officers have access to the internet and can check for prices should you opt to go for the misvaluing the goods. The likelihood is you will get a bill for what the duty and VAT is. However you do run the risk of forfeiture of your goods with this too.
The reality of packages being checked is that it is totally random. It doesnt depend on the courier, it doesnt depend on the value or the goods, its more down to the volume of mail coming in and the number of staff available.
So this is why you will find some say they have a lot checked, some say 1 in 10 packages are checked, etc. Most of the time the odds are in your favour.
The bottom line though is this: when you buy your goods online, factor in the duty and the VAT and admin charge to your calculations.
If its cheaper with it and you dont get charged, you get a better bargain. If its cheaper and you get hit for the duty and VAT - then at least you expected it and budgeted for it.
If its more expensive with duty/VAT - thats your risk assessment to choose whether you want to play the odds and perhaps end up overpaying.
Buying from the EC - Acquisitions
As an individual buying from an EC supplier you will get charged the VAT rate of the country your supplier is in. Bear in mind last time I checked the UK has the 5th LOWEST tax rate - very few countries tax works out cheaper. You may find that by the time you add on 22% tax and shipping it doesnt work out any cheaper than going to your local shop tbh.
Buying from the EC as said before is NOT considered to be an import so NO duty will be applicable on it UNLESS the goods are subject to excise duty or the distance selling rules.
If you are a business and buy from the EC, if you are VAT registered you quote your reg number and the goods will be sold tax free. You then have to account for the tax and claim it here on the same return.
Official Sources
www.hmrc.gov.uk is the HMRC website which contains all the public notices/leaflets etc.
A guide for international post users is the essential info about importing by post.
