Trading in the United Kingdom

The mystery of import VAT

14. October

A complicated British market

Although it has been a good 1½ year since we experienced Brexit, the British market is still complicating trading for many foreign companies. In this newsletter we will shed some light on some of those obstacles a foreign company might face when trading in the British market.

Are you strictly trading B2B in the British market you can allow your customers to handle the import VAT and duty themselves, but by doing this exercise you will experience some customers refusing to deal with you. To overcome this obstacle, we recommend that you apply for a local VAT registration, and like this you will be able to trade on the same terms as the local competitors.

Trading B2C you can likewise allow your costumers handle the import VAT and duty themselves if the consignment’s total value to the customer exceed GBP 135.00. But like beforementioned for letting B2B costumers handling these things themselves, the same issues occur, and your customers will find it too much hassle, ending up going to a local competitor next time. Only reasonable solution for you and your costumers is to get a local VAT registration and make it easy for your costumers.

B2C sales where the total value of the consignments to a single costumer is below GBP 135.00 requires a UK VAT registration.

What is import VAT and when is it imposed?

Are you registered with a VAT number in Great Britain you will have to pay import VAT (and duty, depending on your goods) when your goods cross the British border.

Import VAT is a tax that is payable upon bringing goods into the country (a sort of missing sales tax), and a deductible tax which the company can use against the sales tax, if the goods are sold to British customers.

 It is very common to mix up the terms of duty and import VAT as they are both payable at the border when importing goods, but they are completely different and not to be confused. A duty is a final tax imposed on your goods which are payable by you, whereas the import VAT can be deducted against the sales tax, balancing out the amount.

In Great Britain, the import VAT rate are normally set to 20% unless your consignment contains goods which have reduced VAT rates (eg. Coffee), and on top of that you must pay duty should your goods be duty imposed. Duty rates span between 0% and 25%, and is determined by type, materiel/fabric, value etc. Clothing’s standard duty rate is 12%, but it can be difficult to conclude the exact rate, as you need to know the exact fabric and country of origin for each part of each piece of clothing in your shipment. It is important to research the exact duty- and VAT import rates before you start pricing your products, as it can take a big chunk out of your profit. You can either get help from your freight forwarder, finding the correct rates, or look up your products on the authorities’ website:

Import VAT versus Customs clearance

When you are VAT registered in Great Britain and you have received your EORI number connected to your GB VAT number, it is highly important you ensure that your freight forwarder/transport company declare your goods using your GB VAT and GB EORI numbers, otherwise you legally won’t be the rightful owner of the goods, once they have crossed the border.

In Great Britain you have two options for paying import VAT. Either you pay the import VAT (as a missing sales tax) in customs upon importing the goods, which allows you to deduct the VAT on your next VAT return, and like that balance out the amount or, you use Postponed VAT account which allows you to postpone the payment, and instead deduct it directly on your next VAT return. If you use the freight forwarder to pay your import VAT on your behalf, they will likely charge you a fee for using their Postponed VAT account.

Therefore, it will always be cheaper and easier asking your freight forwarder to use your Postponed VAT account, which is done by ticking having your VRN no. added at header level in the DE3/40, when the driver is clearing the goods in custom. To be able to deduct the import VAT on your next VAT return, you must have access to your online CDS account with HMRC, from where you can download your import VAT statements. The authorities do not allow you to use invoices or other documentation when deducting import VAT, ONLY the HMRC approved import VAT statements can be used. This is a procedure IntraVAT handles for all their clients trading in Great Britain, and we recommend you not to try and do it yourself, as the authorities are very strict and keep an extra eye out for foreign companies trading in Great Britain. It is also worth mentioning that all documents and invoices related to your activities in Great Britain, must be kept for a minimum of 6 years.

VAT rate Category
 0% VAT exempt
 0% Zero rated VAT
 5% Reduced rated VAT 
20% Standard rated VAT