VAT on goods held in bonded UK warehouse

What accounting treatment should we use for the import VAT on goods held in a UK boned warehouse

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One of our clients has just started to use a UK bonded warehouse to store their stock until it is sold to the end customer.  The goods in the warehouse have not been purchased on a sale or return basis.  If they remain unsold our client will have to complete the import into the UK and then dispose of them.

We have a difference of opinion in the office as to how to account for the VAT on the goods held in the warehouse.  The import duty is not an issue as this will be accrued for as part of the reported stock value.

Some think we shouldn’t record the VAT in the accounts until the goods leave the warehouse but, there should be a note to the accounts indicating the value of VAT held in bond.

However, another view is the VAT should be recorded on the balance sheet.  The thinking is show an Input VAT asset with the corresponding entry held against creditors.  The idea is to replicate what would happen if the goods left the warehouse, i.e. pay the import agent and then get reimbursed from HMRC.

Has anybody dealt with this issue and if so, how?

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Quack
By Constantly Confused
23rd Feb 2017 15:23

Not something I have experience of, but I thought the idea behind bonded warehouses was that they were a sort of limbo, whereby items entering the UK and going straight to a bonded warehouse were not deemed to have been imported/acquired until they left the warehouse (and even then, only if they weren't re-exported/dispatched). So surely you can't charge VAT to the accounts, as it hasn't been incurred yet.

No?

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By shaun king
23rd Feb 2017 18:12

If the goods are held in a Bonded Warehouse they have not entered the UK/EU so no VAT or Excise Duty becomes payable until entered into free circulation. If the goods are sold in Bond there is no VAT or Excise Duty liability.

I am assuming you do mean a Bonded warehouse rather than a Customs Warehouse??

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Replying to shaun king:
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By uknick
24th Feb 2017 09:48

My view is nothing is recorded in the accounts for VAT until the goods leave the warehouse. That seems to agree with the views expressed so far.

With regard to duty, I've found examples of having to accrue for this as part of the stock value held in the warehouse as it will be paid at some time and is not recoverable from HMRC.

shaun king wrote:

I am assuming you do mean a Bonded warehouse rather than a Customs Warehouse??

I did say Bonded. But, having just Googled Customs Warehouse, I'm not really sure of the difference. I'm guessing it's a Type B Customs Warehouse managed by the import agent.

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