VAT - Paying VAT on goods we will not own

A service company fitting equipment on behalf of overseas company

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This may be a strange one. 

We have been asked to do some work for a overseas company to cover that companies' warranties. 

They will send the equipment which is usually a straight swap for exiting equipment which has failed. The equipment is vatable and we pay VAT on entry.

We do not own the equipment, it does not hit out balance sheet. 

We charge a storage fee for the equipment which we add VAT for this service as we deliver the service in the UK

We charge a fee for swaping the kit over on which we add VAT as the service it actioned in the UK

My Question is can we claim the VAT back on our VAT return? We don't own the kit and we do not sell the kit, I assume we can't claim it back. 

Replies (5)

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By Ruddles
17th May 2024 12:16

Who are "they" sending the goods to? Who is the importer of record?

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Replying to Ruddles:
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By Intravenus
17th May 2024 14:08

The named importer is ourselves, the UK limited company but we don't pay for the goods and don't take ownership

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Replying to Intravenus:
By Ruddles
17th May 2024 14:49

Who owns the goods? Jason may have some further thoughts (although I would agree with him that you should engage a VAT specialist who can establish all relevant facts) but I would say that if the Chinese company continues to own the goods then you should simply seek to recover the VAT directly from them - you are effectively paying the import VAT on their behalf. I assume that your invoices for the work carried out are addressed to Chinese company?

EDIT -just read your response to Jason. If the Chinese company is indeed reimbursing all import duties, including VAT, what made you even consider reclaiming the input VAT from HMRC as well?

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By Jason Croke
17th May 2024 12:34

HMRC issued a Brief on this 15/2020 but doesn't seem to be on the HMRC website anymore, strange, because not aware they withdrew that notice either.

https://www.thecustomhouse.co.uk/customs-news/who-should-account-for-imp... gives some background details

HMRC manual here https://www.gov.uk/hmrc-internal-manuals/vat-input-tax/vit13300

They're not your goods, you're not selling them, so it's not your import VAT to reclaim.

You state that you swap the goods (ie, customer returns broken item under warranty and you ship them a new one), but the new item you ship out to customer I presume you will be billing the overseas company for those goods?

It's unhelpful when asking a question about movement of goods, that you refer only to "the overseas company" because queries relating to movement of goods are dependent upon knowing where the goods are going to, coming from, etc.

You'll need to read the agreement you have with the overseas company in order to understand who is doing what and then speak with your Accountant who might be able to help or refer you to a specialist.

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Replying to Jason Croke:
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By Intravenus
17th May 2024 14:16

Jason Croke wrote:

HMRC issued a Brief on this 15/2020 but doesn't seem to be on the HMRC website anymore, strange, because not aware they withdrew that notice either.

https://www.thecustomhouse.co.uk/customs-news/who-should-account-for-imp... gives some background details

HMRC manual here https://www.gov.uk/hmrc-internal-manuals/vat-input-tax/vit13300

They're not your goods, you're not selling them, so it's not your import VAT to reclaim.

You state that you swap the goods (ie, customer returns broken item under warranty and you ship them a new one), but the new item you ship out to customer I presume you will be billing the overseas company for those goods?

It's unhelpful when asking a question about movement of goods, that you refer only to "the overseas company" because queries relating to movement of goods are dependent upon knowing where the goods are going to, coming from, etc.

You'll need to read the agreement you have with the overseas company in order to understand who is doing what and then speak with your Accountant who might be able to help or refer you to a specialist.

The supplying company is Chinese and the parts are sent to us as they can regularly fail or at least stop operating at required level. We store these items as we need to be able to swap over the defective item with less than a day's notice.

We will then hold the defective item for further instruction.

Thanks for the link, I'll take a look but I think you are confirming my thoughts that we cannot claim the VAT back as we don't won the goods. We currently pay the VAT and duty and get these costs reimbursed.

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