Import VAT

Import VAT

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Hello, I import items from the USA and pay just under 10% import VAT on them as they enter the UK. If (as seems likely with Christmas approaching) my sales exceed the VAT threshold this year would I be able to reclaim this against the 20% I am likely to owe for 2013 ? Any help greatly appreciated.

Replies (15)

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Teignmouth
By Paul Scholes
28th Sep 2013 15:26

Yes

You can claim the lot against any sales "output" tax, it goes in box 4 of the return, here's HMRC's page

If and when you VAT register you can claim back the VAT you paid on any stock you hold at the date of registration but not on stock you sold before it.

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Routemaster image
By tom123
28th Sep 2013 21:32

How are you only paying 10%

I am confused how you are only paying 10% VAT? - or are you purchasing some standard  and some reduced or zero rated items?

Also, be aware that any import duty is not VAT, and cannot be offset against output VAT.

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By User deleted
28th Sep 2013 21:53

You will need ...

... a C79 Certificate which you get each month listing all the customs entries that month. As mentioned above, duty is not reclaimable, only the VAT which is charged on the import value of the goods.

http://www.hmrc.gov.uk/manuals/insmanual/ins12705.htm#IDAHI50G

However, are you VAT Registered yet? It is not clear from your post, if not, you will only be able to reclaim the VAT on stock you still have on hand at the date of registration.

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By shaun king
29th Sep 2013 16:54

you can't be

You cannot be paying 10% Import VAT. I guess you are paying 10% Customs Duty. However, you will have paid VAT on these items unless Zero rated and if you are registered you can offset the import VAT against the VAT charged on sales. Look at your documentation more closely!!

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By DMGbus
29th Sep 2013 17:13

Reduced rate import VAT

VAT notices 362 and 702 refer to an effective reduced rate of import VAT.

However this is for certain works of art / antiques and is 5% not 10%.

Books and magazines can be 0% import VAT being zero rated, as can certain other goods that are normally zero rated in the UK (eg. childrens clothes).

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By shaun king
29th Sep 2013 19:49

strange that

I had ignored Works of Art and antiques as I didn't see the advent of Christmas having a big increase for goods under these headings and if goods are Zero rated they are not 10%!!

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By sarz92
30th Sep 2013 10:37

Thanks for the replies so far......you are right my initial post was not clear.

I pay £100 import VAT on 50 items (which I buy for £500).

I then sell these items for £20 each (should make £1000 on the 50 units). £100 import VAT on final sales of  £1000 which was where I got the confusing 10% from. 

So my understanding now is that I will need to pay to HMRC £4 per item but can then claim back the £2 of import VAT?

 

 

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Replying to Kazmc:
Red Leader
By Red Leader
30th Sep 2013 12:07

not quite

You pay £3.33 VAT on the sale of £20 (£16.67 + 20% VAT of £3.33 = £20). I'm assuming that £20 is the actual amount you receive from the customer.

You deduct the £2 VAT you have had to pay out on the purchase. This gives you a VAT bill to pay of £1.33.

So your gross profit (ignoring any other costs such as import duty or carriage in) is: £16.67 less £10 = £6.67.

Time to increase your prices, perhaps, once you are VAT registered?

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By sarz92
03rd Oct 2013 10:55

That really is great people thanks.

With pre Christmas sales I am almost certainly going to go over the VAT threshold (£79,000) by the end of November. Sorry to ask another dumb question but will I then owe VAT of £5,320 (4000 items X £1.33) for the items sold in the 12 months beforehand.

OR  

Do will I only start paying VAT from December onwards.

Thank you in advance

Sarah

 

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Replying to SammyBerlusconi:
Red Leader
By Red Leader
03rd Oct 2013 11:49

date of registration

VAT will be due on the sales that occur on or after the date that you become registered for VAT. This date will be shown on the VAT certificate when it is issued after you apply to be registered.

The date would normally be the 1st of the second month following the month in which you go over. So in your example, if you go over in November 2013, you will be registered for VAT from 1 January 2014.

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By sarz92
03rd Oct 2013 18:51

That is the best news I have heard for a while.....thought I was going to have to stop selling for a couple of months to avoid a massive VAT bill. As it is I'll just put the prices up a tad in the New Year!

 

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By shaun king
03rd Oct 2013 21:24

stock on hand

Further good news is that you can also claim for the VAT incurred prior to the registration date for the stock held in hand at the date of registration. If you are going to register look at Cash accounting and also consider Flat Rate Schemes with a 1% discount in first year of registration

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Replying to b.clarke:
Red Leader
By Red Leader
04th Oct 2013 12:19

@sarz92

Perhaps you can now see the value of having an accountant? Are you going to get one?

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Replying to Mr_awol:
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By sarz92
15th Oct 2013 19:13

Yes I can now see the value of having an accountant...and therefore I am going to get one (weeks rather than months as I have a number of issues looming)! 

Two questions

1 Is it advisable to search for a local accountant or can it be done online with no real need for face to face contact.

2 Back on the subject of my VAT ...if I go 5 or 10 % through my VAT threshold this year and register for VAT I will have to increase the product price by at least 5%....this may well mean in 2014 I end up selling less than the VAT threshold....would I have to pay any VAT in 2014 if sales in that year were below the threshold.

Kindest regards

Sarah

 

 

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By sarz92
09th Dec 2013 11:37

I am still waiting for my company registration number so cannot yet register for VAT.

I am also interested in an accountant with the excellent knowledge levels shown here....any takers. I live in the middle of Cheshire?  

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