Duties Taxes to UK Customs
Duties Taxes to UK Customs When buying goods from outside the EU, you must pay duties and taxes to UK Customs to have your interests released into the country. The vast majority of shipments are subject to UK Duty and VAT, the two main costs you should understand before importing from overseas.
The amount of UK duty you are required to pay depends on the declared value of the goods and the type of product you’re importing. Each product is given a different duty rating/percentage. To find out the rate you’ll have to pay for your product, you can ask us, and we’ll try to find the most appropriate heading for your goods, or you can use the online 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 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. The taxable import on which VAT is payable is the amount you pay for your goods, the shipping cost, and the UK Duty. So you are effectively paying VAT on everything it costs to buy the goods and get them into circulation in the UK.
Duty and VAT Estimator
We’ve simplified the calculations, so it’s easy for you to estimate the UK Duty & VAT you’ll have to pay and give you an example to work with. In reality, HMRC use a figure called a “VAT Value Adjust” and doesn’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 a 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 £2000 = £70.00
VAT = 20 % of (UK Duty [£70] + Shipping [£300] + Cost of the goods [£2000]) = £474.00
Therefore the total duties and taxes payable to import these goods would be £544.00 (£70 for UK Duty and £474 for VAT) in addition to the £300 shipping cost.
- 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 that 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 and the shipping via bank transfer in one fell swoop before delivery! The service includes this facility (most companies charge an extra fee).
- It’s not dissimilar when importing samples or smaller consignments via the postal service or a courier company. As you will probably have paid the shipping cost upfront, you’ll have the Duty and VAT to pay. The company, be it Royal Mail, Parcelforce, etc., will contact you to let you know how to pay the Import Duty and VAT for your shipment. They’ll typically wait about three weeks for you to pay the costs, after which they can return the goods to the sender.
- Duty and VAT on sample products: There is no definitive answer as it depends 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 are granted. Duty and VAT relief can be given on the 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 £34 for gifts)
- They are intended to gain 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 retail value (goods value + shipping cost + Duty + insurance) of more than £15 are liable to a VAT. There is a higher threshold for UK Duty, and goods with a commercial value of more than £135 (unless the Duty comes to less than £7) are also liable to UK Duty. The exact figures can be found here on HMRC’s site.
- It is not as simple as telling customs that the goods are a sample. Customs set out requirements for importing ‘sample products’ and may seize the goods if they are not met. The conditions 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 marketed; products that are excluded from duty relief include:
- Products that can be used as anything other than samples
- Products intended for consumption customs relieve the product of Duty due to it being seen as a sample. Therefore, they will also alleviate the effect of VAT.
- “Import VAT” in Demystifying Detail VAT on an import from outside the EU is not only charged on the Cost of buying the goods. You’ll pay VAT on all the costs to purchase 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. Before jumping 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. 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 must 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, they are subject to £250 UK Duty. 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 shipment delivery 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 total door-to-door shipping cost being used for the VAT calculation, HMRC uses something called 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 the shipment. It’s 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 tricky bit out of the way! VAT when importing from within the EU Goods travelling within the EU is 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? Am I VAT registered? If you’re VAT registered, you still have to pay the VAT as detailed above, but you can claim back any VAT you pay when importing goods (for your business) to the UK. You can do this through your average VAT return under standard rules. HMRC will generally send you a certificate (form C79) as evidence that you’ve paid import VAT. C79 certificates are issued monthly. 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 comprise the EU’s VAT (fiscal) territory, are listed here.
- Tariff Codes When importing goods to the UK from China, India, the USA or elsewhere outside of the EU, you will need a tariff code to declare the products to UK customs. Customs tariff classification codes (sometimes called HS codes, commodity codes or TARIC codes) define and allocate a duty rating to each imported product. As the importer, you are legally responsible for ensuring the correct tariff code is used. Customs don’t take too kindly to importers bringing goods into the country without paying exactly what they owe; mistakes can lead to fines and delays. Having the correct commodity code for your interests will allow you to know the following:
- The correct duty and VAT ratings for your product
- If you can apply for a preferential duty rating when importing from specific countries (using the General System of Preference (GSP))
- Whether you need an import licence (for plant/animal/hazardous products etc.)
- Whether anti-dumping duties apply (where goods are exported below the 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 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 similarly but the principles aren’t always identical. Here are our tips for 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 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 the central 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 choose, look at the descriptions in bold first.
- Under the bold description, you may have one final option to choose precisely the product type.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 suggest filling out the form at the bottom of the page and passing it on to HMRC so they can send you a rating. 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. We are more than happy to help you search for the correct tariff code, so feel free to get in touch for some expert advice.
- What is Anti-Dumping Duty? There are several reasons why we mentioned above to check the ‘import’ tab once you have found your tariff code. Naturally, it would be best if you did this to ensure that there are no nasty surprises that can pop up along the import process that can and should be made so simple. One of the things you should be looking out for is an ‘Anti-dumping’ import duty percentage. 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 to offload stock faster by the exporter, but it can have a damning impact on the domestic markets of the importing country if not controlled.
- The EU also imposes the Anti-dumping duty measure to ‘countervail’ imports that could harm the UK industry. This Duty increases the Cost of importing particular products. The idea is to boost domestic trade on items they feel need a push in the right direction or maintain an existing domestic industry. Anti-dumping Duty can be extraordinarily high, and we have seen figures imposed that shoot to way over 50% of the value of the cargo. Bikes, steel and graphite products have had anti-dumping duties imposed on them when imported from China, with bicycles the highest percentage (48.5%). These are just a few examples of the products on which the EU have imposed this scheme. Anti-dumping duty levels are calculated by taking many things into account. The primary aim of assessing the anti-dumping Duty is to ensure that the imported goods will cost the buyer (at the 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 an 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, which has been deemed unfair by many. This is due to America’s extremely high labour costs, making it difficult to compare. If you think a particular product is being dumped in the UK, you can report this yourself. You will need to have sufficient evidence of the ‘Dumping’ hurting EU producers and manufacturers, but your report will be considered. You can start a complaint by calling the EC Trade Defence Helpdesk on 0032 22 98 78 73.
- In some cases, there are ways to avoid anti-dumping Duty being imposed. You may be okay importing small quantities of the products that have been hit with anti-dumping duties. You can call HMRC or check their website to find out more. The information you need 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.
- Duty Reductions with the GSP Scheme Importing goods from overseas can be significant for the bottom line, but you must be 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 products purchased from suppliers in certain countries to be lower-rated or even free from Duty. This scheme is in place to enable businesses in developing countries to trade on a broader scale internationally. The scheme, while reasonably complex, is an excellent way for UK importers to lower their buying costs and subsequently increase their margins. If you are aware of the opportunities provided by the GSP scheme when sourcing products and suppliers, you could be making a saving that allows you to push ahead of your competitors. Which Countries? Due to a large number of suppliers manufacturing products, India is the main country worth noting. 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. You can expect enhanced reductions from Bangladesh, Bolivia, Cambodia, Costa Rica, Ecuador, El Salvador, Georgia, Guatemala, Mongolia, Myanmar/Burma, Nepal, Pakistan, Panama, Paraguay, Peru, and Yemen. NB. 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 discount you could or should be getting when you import particular products here on the EU website: How Does It Work? If your 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 eligible for the GSP scheme. Countries can be added or removed from the scheme with little notice because the World Bank sees them as significant enough to stand on their own two feet, so it’s best to stay on top. Here’s the link to HMRC’s GSP page.
- Source: shippo
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