Paying VAT on imports

[tired-boy]

First of all forgive me for my poor understanding, i have already tried to find the answer from the HMRC website but some of the terminology goes over my head.

I have been ordering Radio Controlled Toys from China and i am getting more and more familiar with that process.

It is getting to the stage now where the business needs to be VAT registered. Will i be paying VAT upon clearance of the goods aswell as on the sales?

If you need any more info feel free to ask.

[tired-boy]

Would i correct in saying that when the goods arrive in the country i would need to pay VAT and import duty but as a VAT registered company i can reclaim the VAT paid but not the import duty?

[tkessex]

You will have to pay VAT when importing the goods at a rate equivalent to that applied to similar products in the UK (so 17.5% in this case). As you are importing from outside the EC you will also need to fill out form C88 and pay any tax/duty immediately.

If you were importing from inside the EC, form C88 wouldn't be required as the VAT you pay is classed as acquisition tax on your VAT return. You can also claim the VAT back (when you're VAT registered of course) on such imports as they are business purchases.

You will need to begin charging VAT on all of your taxable sales once you're registered, which may mean an increase in re-sale price or a compromise between that and a reduced profit margin. Either way, the 17.5% added to the net price of the product is payable to HMRC.

[tired-boy]

Originally Posted by tkessex

If you were importing from inside the EC, form C88 wouldn't be required as the VAT you pay is classed as acquisition tax on your VAT return. You can also claim the VAT back (when you're VAT registered of course) on such imports as they are business purchases.

Thanks for your reply. Just so that i clearly understand...........

So if i am VAT registered then i can claim back 100% of VAT paid when importing from within/oustide the EU.

[tired-boy]

Originally Posted by tkessex

As you are importing from outside the EC you will also need to fill out form C88 and pay any tax/duty immediately.

So in this instance (as a VAT registered business), am i able to claim the VAT back (importing from outsidee EC)?

On a side point (nothing to do with importing) If you become VAT registered 5 months after starting up because it becomes evident you will go over the £60k turnover figure, from what point do you pay VAT. Is it from the very beginning (when your prices didnt take VAT into consideration because you didnt realise it was going to go so well)?

[tkessex]

I don't think you can reclaim the VAT paid on imports from outside the EC, but it would be wise to check with HMRC.

If you know that you're going to pass the VAT threshold during the year then you will be liable to pay it from the beginning, rather than from the moment you register.

[tired-boy]

HM Revenue & Customs

If you use that link and look at section 2.3, does that help?

I suppose the question i need to answer is ....... what does it mean by 'Subject to the normal rules', could these 'normal rules' include the country of origin.

[tired-boy]

I just rang HMRC and they were not very kind to a newbie like me with regard to their vocabulary..........

I got the impression that regardless of where the goods were coming from, a VAT registered business would have to pay the Import VAT and would be able to class that as Input tax.

So at the end of the quarter it could be calculated how much VAT was due by calculating the difference between the Input/Output tax.

[Joyous]

Originally Posted by tkessex

I don't think you can reclaim the VAT paid on imports from outside the EC, but it would be wise to check with HMRC.

If you know that you're going to pass the VAT threshold during the year then you will be liable to pay it from the beginning, rather than from the moment you register.

Wow - some serious misinformation here.

You can claim back the VAT that you'll be charged when importing goods. It's input tax and claimable in the same way as domestic VAT. You cannot reclaim the duty however.

If you register voluntarily for VAT you will be liable to pay it from the date that you ask to be registered, not from the very beginning.

Regards

Joy