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Purchasing goods or services from overseas - hidden indirect tax costs
When you procure goods or services from UK suppliers, an additional charge of 20% VAT in the supplier’s invoice will be a common sight. When you purchase or import goods or services from overseas suppliers there may be no mention of VAT in the supplier’s sales orders or invoices. However, there can be additional VAT and Customs Duty costs when you purchase from overseas suppliers:
Goods imported from outside the EU can incur UK Import VAT at 20% and possibly Customs Duty (variable rates).
Sometimes we must charge ourselves UK VAT:
• Goods imported from another EU country (not the UK) can incur UK acquisition VAT at 20%.
• Services “imported” from overseas providers can incur UK reverse charge VAT at 20%.
The relevant VAT codes for purchase orders are:
Goods imported from outside the EU - VAT code FG
Goods imported from another EU country - VAT code EG
Services "imported" from suppliers belonging outside the UK - VAT code FS
When using a purchase card to purchase goods or services from overseas, enter “Foreign” in the Lloyds system and the relevant default VAT code will be allocated.
Where such VAT is incurred in the course of providing our VAT exempt services (education) or our non-business activities (e.g. research funded by a government / public body) we cannot recover any of the above VAT charges and they can represent a real cost to your project or budget. (Additionally, Customs Duty is not recoverable in any case.)
However, there are a limited range of reliefs available around VAT or Duty charges which relate to:
• samples, or
• the purchase of medical/scientific/computer equipment used in medical research, or medicinal products put to similar use.
Please contact our Tax Manager Frazer Holmes on 01509 222079 or on J.F.Holmes@lboro.ac.uk if you have any questions.