If you are importing goods into the UK from specific regions of the world then you will need to pay import vat when you import goods from eu special territories or even from non eu countries. This tax is collected by the hmrc vat department or the hm revenue and customs department at the port or airport itself and the goods are then subject to local sales vat rules.
The hmrc has provided for 14,000 classifications of goods and services that are subject to customs duties, excise duties and import vat. Most alcohol and tobacco products along with certain activities such as gambling are subject to excise duties while almost all other imports fall under customs duties and import vat depending on the goods and the country from where they arrive.
The hmrc has specified eu special territories where import vat will be levied if goods or services are brought in or sent to such territories. They are The French Overseas Departments of Guadeloupe, The Canary Islands in Spain, The Aland Islands in Finland, French Guiana, Mount Athos and Reunion and Martinique in Greece, and The Channel Islands in the UK. This vat will also be levied when you import goods from non eu countries.
However, if you are a vat registered trader in the UK then you can apply for a vat refund in case you have already paid vat on any goods in the country of origin itself before being imported into the UK. You can also offset this vat against sales vat if the goods that you have imported are sold in the local UK market. Countries such as the UK and Italy also offer special vat deferment schemes where you can get relief from import vat for up to one month by filing out a special vat form with the hmrc and opening of a special vat deferment account with them. This move would help protect your cash flow.
Once you start selling your goods or services in the local market then you will also need to charge the local sales vat rate to your clients. You will need to make vat invoices that specifically mention vat rates and also file regular vat returns. If you have problem in understanding various duties and taxes imposed by the hmrc then you should engage the services of a proficient vat and customs agent. This will allow you to concentrate on expanding your business while all relevant paperwork and payment of taxes and duties is handled in an efficient manner.
The import vat rate is the same as sales vat rates of similar products sold in the UK. The UK has 3 vat rate slabs. The first is the standard vat rate of 17.5% that is slated to rise to 20% from January 4, 2011. The second is the reduced vat rate of 5% while the third is zero vat rate. There are also certain goods and services that are totally exempt from any vat.
You should have sufficient knowledge on various duties and taxes applicable on imported goods into the UK so that you can calculate the costs on an accurate basis. You should use all legal avenues to reduce your costs such as vat refunds, vat deferments, etc so that you can lower your costs further and improve the cash flow of your business. You should diligently pay import vat when you import goods from eu special territories or from non eu countries and use the services of an efficient vat agent to claim additional vat back.