- A EU Business
- Selling goods to UK Businesses (B2B)
- Shipping goods from the EU to the UK
- Not yet VAT registered in the UK
VAT rules to export goods from the EU
- Supplies and movements of goods between the EU and the United Kingdom will be subject to the VAT rules on exports. Goods exported from the Union to the United Kingdom will be exempt from VAT if they are dispatched or transported to the United Kingdom, as it would take place for any other destination outside the European Union. In such a situation, the supplier of the exported goods must be able to prove that the goods have left the Union. In this regard, Member States generally base themselves on the certification of exit given to the exporter by the customs office of export.
- The customs export procedure will be mandatory for Union goods leaving the EU customs territory. First the exporter will present the goods and a pre-departure declaration (customs declaration, re-export declaration, exit summary declaration) at the customs office responsible for the place where he is established or where the goods are packed or loaded for export shipment (customs office of export). Subsequently, the goods will be presented at the customs office of exit which may examine the goods presented based on the information received from the customs office of export and will supervise their physical exit out of the EU customs territory. Goods will be exempt from VAT if they are dispatched or transported to a destination outside the EU.
New VAT rules to import goods in the UK
If the supplier in the EU takes over the status of importer, he/she will be the person liable to pay British VAT upon importation. The EU supplier must register for VAT purposes in the United Kingdom. The supply of goods that he carries out afterwards is considered as taking place in the United Kingdom and British VAT is due on the delivery (with or without the application of the newly implemented reverse charge mechanism depending on the VAT status of the purchaser).
There are several ways to avoid paying VAT upon importation:
1. Deferment account (DDA)
Non-VAT registered traders (and any VAT registered traders not using postponed VAT accounting – see below) will need to report and pay import VAT through the customs processes. You’ll have to pay VAT directly to HM Revenue and Customs (HMRC) at UK rates on goods imported when brought into the UK. If the goods are for you to make taxable supplies or use in your business, you can reclaim the VAT paid on your VAT Return. You’ll need the import tax certificate (form C79) to prove you paid the import VAT. HMRC will send you this form.
Within this context, VAT payments can be deferred using a duty deferment account DDA. Traders who import goods regularly may benefit from having a duty deferment account (DDA). This enables customs charges including customs duty, excise duty, and import VAT to be paid once a month through Direct Debit instead of being paid on individual consignments.
To set up a DDA, traders, or their representatives, apply for a deferment account number (DAN) and will need to receive an authorization from HMRC. New rules are being introduced which will allow most traders to use duty deferment without a Customs Comprehensive Guarantee (CCG).
VAT on imports of goods in consignments not exceeding £135 in value will be treated differently to those goods in consignments exceeding £135 – see below
2. Postponed VAT accounting
From 01/01/2021, EU businesses registered in the UK will be able to use postponed VAT accounting to report import VAT in their VAT return for goods imported from anywhere in the world. This means EU businesses will be able to declare and recover import VAT in the same VAT return, rather than having to pay it upfront and recover it later.
VAT registered traders in the United Kingdom can use instead of a DDA account for import the postponed VAT accounting, as detailed below.
You do not need to be authorized to account for import VAT in your VAT Return and can start doing so from January 01,2021. You can account for import VAT if:
- the imported goods are meant for business use
- you include your newly obtained British EORI number, which starts with the letters ‘GB’ on your customs declaration
- you include your VAT registration number on your customs declaration.
HMRC has published guidance for the new postponed VAT accounting rules for imports into the United Kingdom from EU countries.
3. Consignments of Value Below £ 135 - Special rules for sales of goods not exceeding 135 £
For imported goods in a consignment not exceeding a value of £135, excluding excise goods and gifts, import VAT will no longer be due at the border. VAT will be charged on the goods as if they were supplied in the UK and accounted to HMRC in the UK VAT return.
Businesses selling goods to be imported into the United Kingdom with a value not exceeding £135 will be required to charge and collect any VAT due at the time of sale. They will be required to register for VAT in the United Kingdom and to account for the VAT due on their VAT return.
For imports of goods from outside the United Kingdom in consignments not exceeding £135 in value (which aligns with the threshold for customs duty liability), the United Kingdom will be moving the point at which VAT is collected from the point of importation to the point of sale. This will mean that British supply VAT, rather than import VAT, will be due on these consignments:
- No import VAT will be owed on the sale, but customs declarations will still be required.
- the £135 threshold is determined per consignment, and not on individual goods within a consignment. A consignment’s value is based on the VAT exclusive price of the goods in the consignment and does not include separately stated freight charges. The threshold is intended to align with the threshold for customs duty liability.
- The £135 threshold rules also apply to business to business supplies. In the case of a supply to a UK business, however, the UK business is liable for the output VAT under the reverse charge mechanism. For the reverse charge to apply the purchasing business must provide the seller with a UK VAT registration number.
4. New domestic reverse charge
As commented above, a new general reverse charge is implemented into the UK VAT legislation and is applicable on the sale provided the customer is VAT registered in the UK and provides its valid VAT registration number to the seller. Where the value of consignments is above £ 135 in a B2B situation, it is still unclear whether the domestic reverse charge meachanism is applicable or not.
What is our solution?
As commented above, a new general reverse charge is implemented into the UK VAT legislation and is applicable on the sale provided the customer is VAT registered in the UK and provides its valid VAT registration number to the seller. Where the value of consignments is above £ 135 in a B2B situation, it is still unclear whether the domestic reverse charge mechanism is applicable or not.