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What are Duties and Taxes?
When purchasing goods from outside of the EU, you must pay duties and taxies to UK Customs for your goods to be released into the country. Without these costs being paid your cargo can not be moved within the UK.
The amount of UK Duty that you are required to pay is dependent on the declared value of the goods (this is found on your commercial invoice) and the type of product that you’re importing. Each product is given a different duty rating/percentage. In order to find out how much duty is applicable you will need to visit www.gov.uk/trade-tariff.
VAT on an import
When a shipping quote says “plus UK Duty & VAT”, don’t think that the VAT is on the shipping price; it’s actually VAT on the taxable import; If you buy goods from outside the EU, you won’t pay VAT to the supplier, but that doesn’t mean you won’t have to pay it at all. The taxable import on which VAT is payable is the amount that you pay for your goods, plus the shipping cost, plus the UK Duty. You are effectively paying VAT on everything that it costs for you to buy the goods and get them into circulation in the UK.
Importing goods from outside the EU
When importing products from outside the EU, the below calculation is what you should use to estimate the VAT that you will have to pay once the goods are cleared through UK Customs.
VAT on Taxable Import = 20 % of ([Cost to buy your goods] + [UK Duty] + [Shipping Cost & Insurance])
Here’s an example. If goods are bought from China for £5000 and they are subject to £250 UK Duty and the shipping quote to your door is £500 then the VAT due would be approximately £1150:
VAT = 20 % of (£5000 + £250 + £500) = £1150
VAT when importing from within the EU
Goods traveling within the EU are not liable for VAT as it’s a single market. HMRC have more information about VAT within the EU, but the only VAT that a shipping company will charge when importing products from within the EU is VAT on the carriage itself.
What if I am already VAT registered?
If you’re VAT registered, you will need to use your EORI number that is linked to your VAT number. You still have to pay the VAT as detailed above, but you can claim back any VAT that you pay when importing goods (for your business) to the UK. You can do this through your normal VAT return under normal rules.
When your EORI number is declared to UK Customs, if linked to your VAT number it will alert HMRC who will generally send you a certificate (form C79) as evidence that you’ve paid import VAT. C79 certificates are issued monthly (not per shipment) and should be received around the 24th of the month following your import. HMRC will send the certificate to the address registered to your VAT number.