We have a USA customer, we usually arrange manufacture in Cambodia and deliver in the USA adn don't need to wory about UK VAT. THe product is zero rated for duty but 20% VAT.
The USA customer has a client in the UK and NL. Instead of the goods going Cambodia to USA and then to UK or NL, to save time and shipping, they want to send from Cambodia to their customer.
If we bring the container into our UK warehouse, we can deal with claiming the VAT back but if we deliver to the UK, we must charge VAT to the USA customer who can't claim the VAT back and can't charge VAT to the end user. Any solutions?
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I don't think there is a way to avoid VAT as at the end of the day, goods enter the UK or EU and someone has to pay the import VAT. That person can be you, the USA supplier or the end customer?
The answer is driven by who owns the goods at the time they enter the UK/EU.
Can the UK/EU customer be the importer/importer of record and the customer can postpone the VAT, as long as proper instructions are given to the shipper/customs agent?
What is your role /purpose in this transaction? Presumably you are an intermediary, the USA places order with you and you place order with Cambodia. So contractually Cambodia are selling to you and you are contractually selling to USA whereas the physical goods are going Cambodia directly to UK customer....or is your relationship different, if so, how?
As others have stated, if this is going to be a new strategy for the future and to deliver direct, then it makes sense to explore the options, we can give pointers here, but so many things to consider (you don't mention if B2B or B2C, you don't mention if USA and UK are related entities, etc).
For example, USA could cut you out entirely and simply register for VAT in the UK and be the importer and distributor of the goods or USA could register for VAT in UK and you charge them UK VAT when you sell the stock from the warehouse, they reclaim it and then make onward sale to UK customer, but it all depends on what each party is trying to achieve.
I don't think there is a way to avoid VAT as at the end of the day, goods enter the UK or EU and someone has to pay the import VAT. That person can be you, the USA supplier or the end customer?
The answer is driven by who owns the goods at the time they enter the UK/EU.
Can the UK/EU customer be the importer/importer of record and the customer can postpone the VAT, as long as proper instructions are given to the shipper/customs agent?
What is your role /purpose in this transaction? Presumably you are an intermediary, the USA places order with you and you place order with Cambodia. So contractually Cambodia are selling to you and you are contractually selling to USA whereas the physical goods are going Cambodia directly to UK customer....or is your relationship different, if so, how?
As others have stated, if this is going to be a new strategy for the future and to deliver direct, then it makes sense to explore the options, we can give pointers here, but so many things to consider (you don't mention if B2B or B2C, you don't mention if USA and UK are related entities, etc).
For example, USA could cut you out entirely and simply register for VAT in the UK and be the importer and distributor of the goods or USA could register for VAT in UK and you charge them UK VAT when you sell the stock from the warehouse, they reclaim it and then make onward sale to UK customer, but it all depends on what each party is trying to achieve.
Thanks for your help.
If we bought it into the UK, we'd pay the VAT and claim it back. If we were to sell on to a UK VAT registered customer, we'd charge the VAT and that customer would claim the VAT back. The products are reusable bags so the 'end' customer in the UK will actually give them away .
In this case, our US customer would not normally want us to invoice the end customer as there would always be the fear the customer would try to leapfrog the middle man.
So, the US customer would want us to invoice them in the US but my understanding is we have to charge VAT as the goods are destined to the UK. The US can't reclaim the VAT so the goods are 20% more than they anticipated.
"So, the US customer would want us to invoice them in the US but my understanding is we have to charge VAT as the goods are destined to the UK. The US can't reclaim the VAT so the goods are 20% more than they anticipated."
The USA business takes ownership of the goods in the UK - whether you take ownership first and then sell to the USA or the USA acts as the importer into the UK, all roads lead to the USA business owning goods in the UK and as the USA business owns goods in the UK and makes sales in the UK, it is required to register for UK VAT (Nil threshold for non-UK businesses).
Because you need to be the intermediary in this transaction (ie, goods can't go direct to end customer) then the options are very limited.
VAT is more about contract law than accounting, so you need to follow the mantra of "who is selling what to whom" at each stage of the transaction, always follow ownership/title of the goods, there can only be one person owning those goods at each stage.