Imports, exports and VAT

Import VAT

Goods brought into the UK are charged import VAT at the rate that would apply if you bought them domestically, usually 20%. It is charged on the value of the goods plus shipping, insurance and any customs duty, so the base is larger than the invoice price.

Goods value                        £2,000
Shipping and insurance               £180
Customs duty                         £110
                                  --------
Value for VAT                      £2,290
Import VAT at 20%                     £458

VAT is charged on the duty as well as the goods.

Postponed VAT accounting

Rather than paying import VAT at the border and reclaiming it later, VAT-registered businesses can use postponed VAT accounting: declare the import VAT and reclaim it on the same return, so the two cancel out and nothing is paid up front.

The cash flow benefit is substantial for regular importers, and it is the default choice for most VAT-registered businesses bringing in goods.

Exports

Goods exported outside the UK are generally zero-rated, so no VAT is charged. Zero-rated is not exempt: you still reclaim input VAT on the costs of making those sales, and the turnover still counts towards the registration threshold.

You must hold evidence of export, typically shipping and customs documentation, within set time limits. Without it, HMRC can treat the sale as standard-rated and assess the VAT against you.

The bit HMRC does not spell out

Courier handling fees are not VAT. When a parcel arrives and the courier demands payment, that charge is usually import VAT plus duty plus their own administration fee, and only the VAT element is reclaimable.

To reclaim import VAT you need the official C79 certificate or your postponed VAT statement, not the courier's invoice. Businesses routinely try to reclaim from the courier paperwork and cannot, because it is not the document HMRC recognises.

You have reached the end

You now know when registration becomes compulsory, whether voluntary registration helps, how the schemes compare, how to file a return, what a valid invoice needs, what you can reclaim, and how imports and exports work. The exam covers all three modules.

Common mistakes

• Forgetting VAT is charged on shipping and duty too. The base is bigger than the invoice.
• Not using postponed VAT accounting. It removes the cash flow hit entirely.
• Reclaiming from a courier invoice. You need the C79 or postponed statement.
• Zero-rating an export without evidence. HMRC can assess the VAT against you.