There are important VAT rules to consider if your business imports or exports goods or makes sales to other countries. Understanding the rules will help your business run smoothly and ensure you avoid fines and financial penalties. Complex rules and regulations govern imports and exports.
In general terms, VAT is payable on all imports at the same rate that would apply to the product or service in the UK. You do not have to register for VAT to import goods, but obviously if you do not register you will not be able to claim back any VAT you pay. If you buy goods in the European Union you must declare output tax on them on your VAT return. However, you are allowed to reclaim input tax on the goods subject to the normal rules.
If you import goods from outside the EU you will have to pay import VAT and duty before the goods are released by HM Revenue & Customs. Remember that ‘duty’ is a separate and additional tax which is based on the value of imported goods. The amount of duty varies and depends on the country of origin and the type of product.
Unfortunately duty cannot be reclaimed by VAT registered businesses. There is no duty on goods which originate in an EU country or which have already been imported with charges already paid. Once in the EU there is no more duty to pay if the goods are transported from EU country to EU country.
If you import goods from outside the EU you can store them in approved HMRC warehouses if you wish and only pay VAT and import duty when the goods leave the warehouse. This facility can be particularly useful if you do not intend to sell goods immediately.
If you plan to re-export the goods after processing them you can apply for Inward Processing Relief. VAT and duty only become payable if you sell the goods in the UK or do not comply fully with the scheme’s conditions. If you import regularly consider a deferment account, where you settle VAT and duty on a monthly basis. A deferment account is free and the advantage is you can put off payment for an average of 30 days and your goods will normally be cleared for release more quickly. You may need a bank guarantee, although the recently simplified rules (known as SIVA: Simplified Import VAT Accounting) means this is not always necessary. Terms and conditions apply, and not all businesses are eligible so check to see if you qualify.
To reclaim VAT on imports you should fill in your VAT return for the period during which the goods were imported - you will get a C79 certificate to show what import VAT you have paid - and you will need to keep it as evidence to support your claim for inspection by a VAT visiting officer.
If you export goods outside of the EU you can zero rate their sale provided that you retain commercial and official evidence of their removal from the U.K. The same rules will apply to the sale of most goods to customers registered for VAT in the EU. Under these circumstances you will also need to obtain and record their VAT registration number on your invoice. If you sell goods in sufficient quantities to non registered customers in the EU you may be required to VAT register in other EU States.
If you do lots of trade with Europe you may have to submit more detailed information, know as the INTRASTAT Supplementary Declarations.
The rules relating to the export of services are exceptionally complex and you should seek professional advice.