Duties, import tax and VAT can be a confusing subject when importing, especially if you aren’t already familiar with the process…keep reading for everything you need to know about import tax UK.
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What are Duties and Import Taxes?
When buying goods from outside the EU, you have to pay UK import tax before your goods will be released. (To make sure that you understand everything there is to know about Customs and what could cause your goods to be held – which costs you extra money! – we have also written a Guide To UK Customs we recommend you read.) The vast majority of shipments are subject to UK Duty and VAT and these are the two main costs that you should understand before importing from overseas.
UK Duty
The amount of UK Duty that you are required to pay is dependent on the declared value of the goods and the type of product that you’re importing. Each product is given a different duty rating/percentage. To find out the percentage you’ll have to pay on your product, you can either ask us and we’ll try to find the most appropriate heading for your goods or you can use the online tariff at www.gov.uk/trade-tariff (here are our tips on using the tariff).
UK 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.
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Duty and VAT Estimator
For questions you may have such as How much is import VAT?, we’ve simplified the calculations so it’s easy for you to estimate the UK Duty & VAT you’ll have to pay and given you an example to work with. In reality, HMRC use a figure called a “VAT Value Adjust” and don’t work from the full shipping quote (which also affects the UK Duty) but for a good estimate you can follow this example or use our calculator:
If you pay your supplier USD$3000 (let’s call it £2000) for your goods, the UK Duty rating for these particular goods is 3.5% and the shipping quote is £300 then:
UK Duty = 3.5 % of £2300 = £80.50
VAT = 20 % of (UK Duty [£80.50] + Shipping [£300] + Cost of the goods [£2000]) = £476.00
Therefore the total duties and taxes payable to import these goods would be £556.50 (£80.50 for UK Duty and £476 for VAT) in addition to the £300 shipping cost.
(VAT rate of 20% is assumed)
UK Duty & VAT Estimate = £
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How to Pay Duty and VAT
If you’re uncertain about how to pay the Duty and VAT you owe to HMRC for your import, don’t be – it’s easy. However you import your goods, the company who does the customs clearance will most likely contact you to confirm how much you owe and how to pay it.When importing with Shippo, we’ll declare your goods to customs and pay the UK Duty and VAT on your behalf to have your consignment released. At this point we’ll have the exact UK Duty and VAT figures and will forward them to your freight invoice. You’ll then pay the Duty and Import VAT along with the shipping via bank transfer, in one fell swoop before delivery! This facility is included as part of the service (most companies charge an extra fee).
When importing samples or smaller consignments via the postal service or a courier company, it’s not dissimilar. As you will probably have paid the shipping cost upfront, you’ll just have the Duty and VAT to pay. The company, be it Royal Mail, Parcelforce, FedEx etc., will contact you to let you know how to pay the Import Duty and VAT for your shipment. They’ll normally wait for about three weeks for you to pay the costs, after which they can return the goods to the sender.
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Duty and VAT on sample products
There is no definitive answer on this as it is very dependent on a few factors. Usually there would be duty costs when importing goods from China, India, Taiwan and the USA but there are some cases where Duty and VAT relief is granted. Duty and VAT relief can be granted on sample of a product if:- Once imported they can only be used as sample products
- Are of negligible value (less than £15 for businesses or £39 for gifts)
- Are intended for the purpose of gaining orders for the commercial product they represent (i.e. are not fully functional)
Customs may change their exact figures but at the time of writing, goods with a commercial value (goods value + shipping cost + duty + insurance) of more than £15 are liable to VAT. There is a higher threshold for UK Duty and goods with a commercial value of more than £135 are also liable to UK Duty. The exact figures can be found here on HMRC’s site.
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It is not as simple telling customs that the goods are a sample. Customs set out requirements of those importing ‘sample products’, and may seize the goods if they are not met.
The requirements when importing a product from overseas for sample purposes are to do one or more of the following:
- have your supplier tear, perforate, slash or deface the product
- Ensure the product is permanently marked
Products that are excluded from duty relief include:
- Products that can be used as anything other than samples
- Products intended for consumption
If customs relieve the product of duty due to it being seen as a sample, they will also relieve the product of VAT.
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“Import Tax/VAT” in Demystifying Detail
VAT on an import from outside the EU is not only charged on the cost to buy the goods. You’ll pay VAT on all the costs to buy and get them to you in the UK.When you’re buying products from outside the EU, your supplier won’t ask you to pay VAT on the products. Before you jump up and down with excitement, this isn’t the loophole you’ve been waiting for to get one over on HMRC! If you have to pay VAT when buying the same products in the UK, you’ll have to pay it on the import too but it’s a bit more complicated than that.
HMRC try to make VAT a fair playing field for all. If you buy a taxable product from the shop at the end of your street, you have to pay VAT on the retail price. However, this price includes all the costs to get that product onto the shelf. As a result, import VAT is not as simple as paying VAT on your overseas supplier’s price.
Ahh, my brain hurts, just give me an overview!
When importing products from outside the EU, here’s how you should estimate the VAT that you’ll 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 for you to establish the approximate figure. 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
The detailed explanation
In reality, the principle above is correct but the way it’s worked out is slightly different. This is because any two companies importing identical products purchased for the same amount should pay the same Duty and VAT figures. It wouldn’t be fair if one company was in the Scottish Highlands and another was next door to the port in Felixstowe or Southampton. The company next to the port of arrival may pay £200 less for delivery of a shipment than the company in the Highlands. That would mean a £40 difference in the VAT that they paid… HMRC have thought of this already!
Rather than the full door to door shipping cost being used for the VAT calculation, HMRC use something call VAT Value Adjustment. When calculating the VAT that has to be paid, the shipping cost to get the goods to the EU border is taken (only part of the shipping quote). This is then added to a VAT Value Adjust figure that depends on the size of shipment. It’s supposedly an average of UK charges to clear and deliver the goods into EU circulation.
Less than container load (LCL) shipments have a minimum of £170 for the VAT Value Adjustment figure, full container load (FCL) shipments have a £550 VAT Value Adjustment figure and Airfreight shipments have a £100 minimum figure.
… And relax, that’s the tough bit out the way!
VAT when importing from within the EU
Goods traveling within the EU are not liable for VAT in the same way 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 about me, I’m VAT registered?
If you’re VAT registered….
MAKE SURE YOU USE AN 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.
If you have misplaced or not received a C79 form from an Import you can contact HMRC to receive a replacement. HMRC holds records of all C79 forms from the last 6 years. Generally a replacement will take about 2 – 3 weeks to be processed. For more information contact the VAT Central Unit Microfilm Section (HMRC).
You can find more information about the VAT payable on imports here. HMRC view the ‘EU’ as the VAT (fiscal) territory of the EU, which is different from the Customs territory of the EU. The countries and territories, which make up the VAT (fiscal) territory of the EU, are listed here.
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Tariff Codes
When importing goods to the UK from China, India, the USA or anywhere else outside of the EU, you will need a tariff code to declare the products to UK customs.
Customs tariff classification codes (sometimes referred to as HS codes, commodity codes or TARIC codes) are used to define and allocate a duty rating to each product being imported. As the importer, you are legally responsible to ensure the correct tariff code is used. Customs don’t take too kindly to importers bringing goods in to the country without paying exactly what they owe; mistakes can lead to fines and delays.
Having the correct commodity code for your goods will allow you to know:
- The correct duty and VAT ratings for your product
- If you can apply for a preferential duty rating when importing from the certain countries (using the General System of Preference (GSP))
- Whether you need to obtain an import licence (for plant/animal/hazardous products etc.)
- Whether anti-dumping duties apply (where goods are exported below domestic value)
Want to know how much UK Duty you’ll have to pay when importing your goods? Use the below guide to the UK Duty Tariff to identify the duty percentage and then use our calculator to get the figures.
Using the Tariff to get a Duty Rating
In order to classify your goods you’ll need to make use of the Tariff. Occasionally your supplier will help you out but don’t forget to check the tariff code as the global systems are structured in a similar way but the codes aren’t always identical.
Here are our tips to finding a tariff code:
- Try the ‘Search the tariff’ – this is the golden bullet! If you type in your product and it gives you the link to a tariff code that’s obviously correct, you have to wave your hands in the air like you just don’t care!
- Try searching the tariff alphabetically – this may help narrow down your options
- Go through the sections – the nuclear option, as it can be a minefield; here’s what we’d do:
- Click on the title of a main section; your goods should fall naturally into one of these
- You should be directed to some chapters which are numbered. Click on the most appropriate chapter
- More numbers! You’re getting closer – use the same principle to click through to the headings
- Finally, you should have a list of options and associated codes (to the right); be careful which you chose, look at the descriptions in bold first
- Under the bold description, you may have one final option to choose exactly what type of product it is.
When you finally click through to the tariff code, there should be an overview for you to see the duty percentage. Click the ‘Import’ tab to check whether there are any measures when importing these products from the country that you are/intend to import them from.
When the code is not clear cut, we would suggest emailing HMRC so they can send you a code – HERE’S HOW.
If you’d like customs to make a legally binding decision on the correct classification of your products, you can apply for a Binding Tariff Information (BTI) ruling.
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We are more than happy to help you in your search for the correct tariff code, so feel free to get in touch for some expert advice.
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What is Anti-Dumping Duty And How Does It Relate To Import Tax?
Anti-dumping duty is imposed on imports being ‘dumped’ in the UK and elsewhere within the EU. ‘Dumping’ is when foreign exporters sell goods abroad at a price lower than their local market rate. They may do this in order to offload stock faster by exporting, but can have a damning impact on the domestic markets of the importing country if not controlled.
The anti-dumping duty measure is also imposed by the EU in an attempt to ‘counterveil’ imports that could harm UK industry. This duty increases the cost to import particular products. The idea is to boost domestic trade on particular items that they feel need a push in the right direction or to maintain an existing domestic industry.
Anti-dumping duty can be extremely high and we have seen figures imposed that shoot to way over 50% of the value of cargo. Products such as bicycles, e-bikes, solar panels and ceramic tableware and tiles have had anti-dumping duties imposed on them when imported from China. These are just a few examples of the products in which the EU have imposed this scheme on. Here is a list of the most recently applied anti-dumping duty measures as provided by HMRC.
There are a number of reasons why we mentioned above in the Tariff Codes section to check the ‘import’ tab once you have found your tariff code. One of the main things you should be looking out for is an ‘Anti-dumping/countervailing statistic’ with an associated duty percentage.
As an example of the huge effects that anti-dumping duties have on the cost to buy products from outside the EU importing e-bikes from China now attract them. As of 18th July 2018 all e-bike categories are subject to anti-dumping duties of 83.6% (unless the Chinese supplier has been allocated a reduced rate by the EU). When buying these type of goods ☑️ you’ll be hit by anti-dumping duties of up to 83.6% in addition to the standard import duty rating of 6% (click on the “Import” tab to see how it looks on the trade tariff). The cost to buy and import these products has almost doubled as a result overnight which, the EU hope, will encourage importers to buy them from within the EU and boost the economies within it.
Anti-dumping duty levels are calculated taking many things into account. The primary aim of imposing anti-dumping duty is to ensure that the goods being imported will cost the buyer (at very least) the same as they would have cost a local trader in the exporting country. This makes importing regularly ‘dumped’ products less attractive to EU importers. In some cases (particularly China), it is difficult to impose anti – dumping duty to meet their ‘market rates’ as they are viewed as a ‘government backed’ economy and don’t have market economy status.
EU chiefs therefore use the market rates of an economy similarly sized to China, which is becoming harder and harder to find. America is regularly selected as the analogue market, a decision that has been deemed unfair by many. This is due to Americas extremely high labour costs, making it difficult to compare.
If you think a certain product is being dumped in the UK, you can report this yourself. You will need to have sufficient evidence of the ‘Dumping’ having a negative impact on EU producers and manufacturers, but your report will be considered. You can start a complaint by calling the EC Trade Defence Help desk on 0032 22 98 78 73.
In some cases, there are ways to avoid the anti-dumping duty being imposed. If you are importing small quantities of the products that have been hit with the anti-dumping duties, then you may be okay. You can call HMRC or check their website to find out more. The information you need to know will all be on the ‘Import section’ of the relevant pages, but if you struggle to find what you are looking for… feel free to contact us for some guidance. We’ve included more information about Anti-Dumping Duty in our UK Customs Walkthrough, so if you would like more information feel free to read it.
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UK Tax/Duty Reductions with the GSP Scheme
Importing goods from overseas can be great for the bottom line, but it’s vital that you are making as many savings as possible along the way. The GSP scheme is one of those opportunities.
The GSP (Generalised System of Preferences) scheme is an EU directive that allows for products being purchased from suppliers in certain countries to be lower rated or even free from duty. This scheme is in place to allow businesses in developing countries to trade on a wider scale internationally.
The scheme, while fairly complex, is a great way for UK importers to lower their buying costs and subsequently increase their margins. If when sourcing products and suppliers, you are aware of the opportunities provided by the GSP scheme, you could be making a saving that allows you to push ahead of your competitors.
Which Countries?
Due to the large number of suppliers manufacturing products, the main country that is worth noting is India. If you have, or are sourcing a supplier, here’s a list of countries that are entitled to GSP preferences:
Botswana, Cameroon, Congo (Republic of), Cote d’Ivoire, Fiji, Ghana, India, Indonesia, Iraq, Kenya, Namibia, Nigeria, the Philippines, Sri Lanka, Syrian (Arab Republic), Swaziland, Ukraine, Uzbekistan, Vietnam.
Among others, you can expect enhanced reductions from:
Bangladesh, Bolivia, Cambodia, Costa Rica, Ecuador, El Salvador, Georgia, Guatemala, Mongolia, Myanmar/Burma, Nepal, Pakistan, Panama, Paraguay, Peru, Yemen.
N.B. Correct at time of writing
(There are smaller countries also on the lists, see here):
What’s the Reduction in Duty?
The rate of duty that you’ll have to pay depends on the type of goods and which country the goods are deemed to have come from. You can check out how much of a discount you could or should be getting when you import particular products here on the EU website:
If you need some help with establishing the tariff code, you can either use our guide or drop us a line with a description of your goods to info@shippo.co.uk
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How Does It Work?
If you’re shipment is eligible for the reduced UK Duty rate under the GSP scheme, you must ask your supplier for a Form A (Certificate of Origin). The certificate must be stamped and signed by a particular government authority in the country of export to prove its validity. With this, the goods can be declared as eligible for the GSP scheme.
Countries can be added or removed from the scheme with little notice as a result of the World Bank seeing them as large enough to stand on their own two feet so it’s best to stay on top of it. Here’s the link to HMRC’s GSP page.
There is no definitive answer on this as it is very dependent on a few factors. Usually there would be duty costs when importing goods from China, India, Taiwan and the USA but there are some cases where Duty and VAT relief is granted. Duty and VAT relief can be granted on sample of a product if:
