UK Duty & VAT – Get it Right

When you're importing, one of the most vital - and overlooked - things to consider are your UK customs costs. Duties and taxes are by far one of the largest costs, so you should be aware of them before you ship. This is our easy guide to UK Duty and VAT.

Paying UK Duty and VAT comes as part and parcel of importing products from outside the EU. It’s an inescapable fact – and, if you do try to dodge the fees, UK Customs simply won’t release your goods to you. However, how do you know if you’re paying the right amount?

All About UK Duty

What Is UK Duty?

UK Duty is an additional cost that you have to pay to HMRC alongside your taxes. UK Duty is calculated as a percentage of the cost of your goods; the percentage depends on the type of goods that you’re importing as they all have different duty codes.

Picking a Duty Code

There are tens of thousands of commodity codes and choosing the correct one is not always an exact science.  Legally it’s the importer’s responsibility to declare the correct code.

  • You can search the online tariff or call the classification helpline on 01702 366077 to ensure that you make the right decision.
  •  Goods being imported into the UK from certain countries will be able to take advantage of preferential rates of duty under various trading agreements.  In many cases the duty rate will be reduced or even become zero rated.
  • Consider whether the code should be chosen based on the material from which the product is made or on the product’s use, sometimes the code isn’t obvious in either.

Crazy Ratings

UK Duty ratings are not always obvious or seemingly sensible, here are just a few of the many oddities in the tariff so never make assumptions:

  • Dolls based on human beings are subject to 4.7% Duty and dolls that don’t look human are duty free!
  • The UK Duty rating on a plastic cover to protect a book or a computer would be liable to 50% more UK Duty if it has a small clip to hold it closed.
  • Tricycles are Duty free at 0% but bicycles are heavily taxed at 14%, unicycles carry a 15% Duty rating as would a cycle with 4 wheels.
  • Importing parts of a product and putting them together once delivered often reduces the duty rating than importing the product whole.

Anti-Dumping Duty

It’s worth noting that some goods carry an anti-dumping duty. Anti-dumping duty is essentially a duty percentage that is much higher than the usual; this is something the government employs to protect the economy. Some goods will be sold to importers at so far below market value that the importer can sell it on below market value, which brings down the entire market. Anti-dumping duty is a way of evening these scales. If you want to learn more about anti-dumping duty and why it happens, read our post explaining Anti-Dumping Duty.

The Real Cost Of VAT When Importing

Many of the mistakes that we see first time importers make are simply because they expect things to go . . . well, the same way that they’ve been going their entire lives. This applies to not being prepared to unload the goods when they arrive, expecting the quality of goods to be exactly the same and even just expecting that the business culture they’re used to is the same one that their supplier is.

The real cost of VAT that you’ll pay when importing is one such assumption – it’s far more than you’d expect. One of the most common mistakes that we see is the assumption that VAT is only paid on the cost of freight, or the cost of the goods. Well, it’s not.

You pay VAT for the entire purchase.

So that’s the cost of your goods, the cost of shipping and the UK duty that you pay on top of that. You’ll be charged 20% of that entire cost. (If you want to know more about how the VAT is calculated, read our UK Duties, Taxes and VAT explainer.)

Getting Your VAT Money Back

All hope is not lost, though – you can claim back your money if you’re VAT registered!

VAT Relief

On occasion, savings can also be made on the VAT, a major plus if you’re not VAT registered!  Children’s clothing and equipment for disabled people is zero rated for VAT and there are VAT reductions on other products such as those for renewable energy.

Inward Processing Relief

Reducing UK Duty and VAT figures through proper declaration are not the only ways to minimise the costs when importing.  There are governmental relief schemes on import duties and taxes in specific situations. If you import some or all of your goods into the UK simply to be processed and sent back outside the EU, you may be permitted to import them under the inward processing relief (IPR) scheme. In this case, you will receive an IPR number and you must re-export the goods by an agreed date, but you will avoid paying UK Duty and VAT on all products that you are selling outside the EU.

We hope that you enjoyed this post – and that you have a better understanding of UK Duty & VAT. Don’t forget to share and follow our social media!

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