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VAT and Customs Duty in a No Deal Brexit

For all goods sourced from the EU there will be:

• Customs duty to pay on import. Customs duty is charged as a percentage of the value of the goods, this varies depending on what the goods are and what they are being used for. Customs duty cannot be reclaimed via the taxation system.
• Import VAT to pay on import. Unless there is a specific relief to zero rate goods, import VAT is charged at 20% of the value of the goods
• A customs declaration to HMRC, this is a legal requirement for all goods imported into the UK. The declaration is submitted to HMRC via an online system and the average broker charge for each declaration is £35 [Note: this is the average broker cost, it may differ to what we may actually be charged per declaration]

In addition, the lead times for ordering goods is likely to be longer as goods will be subject to customs controls and there could be delays at the UK border:

• If goods are selected for inspection prior to import
• If there is a delay in submitting the customs declaration
• If there is a delay in paying the customs duty

Low Value Consignment Relief (LVCR)

Affects orders which are subject to VAT at 20% standard rate. The latest HMRC information on this is:

LVCR currently applies to parcels received from non-UK suppliers and is a tax (VAT) relief on goods valued at £15 or less. The UK is removing this relief in line with the global direction of travel on LCVR policy.

For parcels valued up to and including £135 a technology-based solution will allow VAT to be collected from the overseas business that is selling the goods in the UK. Overseas businesses will charge VAT at the point of purchase and will be expected to register with a HMRC digital service and account for VAT due. Please note that this does not apply to excise goods.

This new online service will be a registration, accounting, and payments service for overseas businesses. On registration, businesses will be provided with a Unique Identifier which will accompany the parcels they send into the UK. They will then declare the VAT due on those parcels and pay this via their online account. This ensures the process of paying VAT on parcels does not become difficult for UK consumers and businesses. Registration for overseas business is planned for early 2019, prior to 29 March.

On goods worth more than £135 sent as parcels, VAT will continue to be collected from UK recipients in line with current procedures for parcels from non-EU countries. VAT will also continue to be collected in line with current procedures for all excise goods sent as parcels and potentially in cases where their supplier is not compliant with HMRC’s new parcels policy.

The mechanics and low level detail of how the system will work has not yet been published, however, HMRC is working with the relevant industry stakeholders and will provide further information soon.

Postponed import VAT accounting

In the event of a ‘no-deal’ Brexit, the government will introduce a system of postponed import VAT accounting for goods brought into the UK. The import VAT will be accounted for on the VAT return rather than paid to HMRC on import or using a deferment account. The system will apply to imports from EU and non-EU countries. Further details have not yet been made available.

Please contact Frazer Holmes on 01509 222079 or via email if you have any queries.

Posted by
Frazer Holmes (extension 222079)
Posted on
Monday, 21 January 2019 at 12:16 GMT
Posted in

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