Major import VAT changes are live
Significant changes to whom is entitled to reclaim import VAT came into force on Monday, regardless of form of Brexit we eventually get
To date HMRC has permitted a ‘person’ who does not actually own the goods at the point of entry into the UK to act as the ‘importer of record’. The declaration at the port of entry then generates the import VAT certificate (C79) which supports the import VAT reclaimed by the importer of record.
Import VAT is paid at the point of entry into the UK, from non-EU countries, and is recoverable when the ‘importer of record’ provides their EORI number and a certificate (C79) evidencing the payment on their UK VAT return, in line with normal VAT recovery rules.
In a clarification, which represents a significant change, that will affect many businesses involved in the importation of goods, only the legal owner of the goods will be entitled to reclaim the VAT paid when goods are imported.
How you will be affected
If you purchase goods from outside the EU where ownership only passes when the goods are paid for but you act as the importer of record and claim the import VAT.
This will no longer be permitted and could affect cashflow, the price you will pay, and potentially disrupt your supply chain if goods are delayed.
If you are you a foreign business that sells goods to UK customers but own the goods until delivered in the UK/paid for, or you supply your UK subsidiary with goods.
You will now be responsible for the importation of those goods.
How can you mitigate your VAT cost and secure import VAT recovery? Will you have an obligation or option to register for VAT in the UK or are you able to reclaim the import VAT paid via an alternative procedure?
Declaring and paying Customs duties will also be your responsibility going forward. Customs duty is not recoverable in the same way that VAT is. This may impact your supply chain/contracts/pricing structure. Are you eligible for VAT/duty reliefs?
Is your business involved in working on goods where goods are temporarily imported and then exported/sent back to the owner?
You should consider applying for VAT/duty reliefs.
Businesses should consider the impact of these changes and make arrangements to ensure any costs/disruption to the business are minimised. Contractual terms should be reviewed to ensure they remain relevant to the ‘new’ trading circumstances and business continuity risk is minimised.
This does represent a significant change which could adversely affect suppliers and customers in the supply chain both practically and financially. If the UK leaves the EU without a deal, the impact of this change may well be greater.