Independent VAT Consultant
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Horrors hidden in import VAT rules

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If businesses incorrectly reclaim import VAT on goods they don’t own, they can be in for a nasty surprise. HMRC has clarified its policy in this area as Neil Warren explains.

21st Oct 2020
Independent VAT Consultant
Columnist
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There’s a lot going on in the VAT world at the moment, so Revenue and Customs Brief 15/2020 issued by HMRC on 2 October 2020 is probably not on your bedtime reading list.

This Brief covers a very practical issue, looking at situations when import VAT is reclaimed by a VAT registered business or organisation on goods it does not own. This should not happen unless the importer is acting as agent for the owner, so claims input tax and charges output tax when the goods are resold in the UK (s 47, VATA 1994).

True story – lease of equipment

About six years ago, a Chinese based company imported some equipment into the UK worth £1m. Let’s say duty of £100,000 was paid and VAT of £220,000 on the duty inclusive figure. The equipment was leased by the Chinese company to a VAT registered UK business for an annual fee of £250,000. What are the VAT issues?

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Replies (2)

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By ColA
22nd Oct 2020 09:44

Come 1 January 2021 onwards this, at current impasse on U.K./EU negotiations, unlikely to be an issue!

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By Richard Taylor AG
22nd Oct 2020 09:57

Looking at para 5.2 of N723A it says you cannot claim a refund on any supply used or to be used to make a supply in the UK. Under the place of supply rules the Chinese companies supply is made in the UK.

I wondered why the import VAT is not excluded under this rule, is it because an import is not seen as a supply?

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