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Imports and exports – How does VAT work?

Value-added tax (VAT) is a tax that’s added to the price of goods and services in the UK.

The tax is collected by businesses on behalf of the Government and is paid by consumers as part of the final price of the goods or services they buy.


Importing goods into the UK

When goods are imported into the UK from outside the EU, they are subject to VAT.

The VAT is calculated based on the value of the goods, including any customs duties and other charges.

The VAT is paid by the importer and is usually collected by HM Revenue and Customs (HMRC) at the same time as any other taxes or duties.

If you’re a VAT-registered business and you import goods into the UK, you may be able to reclaim the VAT that you paid on the import.

To do this, you need to include the VAT on your VAT return and provide evidence of the import, such as a customs declaration.

It’s worth noting that if you import goods from the EU, the rules are different. As of 1 January 2021, when the withdrawal agreement on leaving the EU became fully operational, the rules for importing goods from the EU changed.

Now, you’ll usually need to pay VAT on goods imported from the EU, just as you would for goods imported from outside the EU.

However, you may be able to defer the VAT payment until your next VAT return, which can help with cash flow.

Exporting goods from the UK

When you export goods from the UK to a country outside the EU, you don’t usually have to charge VAT on the sale.  

This is known as zero-rating. However, there are some conditions that you need to meet in order to qualify for zero-rating.  

You will need to be able to provide evidence that the goods have been exported, such as a bill of lading or an air waybill.  

If you’re a VAT-registered business, you can still reclaim any VAT that you paid on the goods or services that you used to make the export.  

For example, if you bought raw materials to make the goods that you’re exporting, you can reclaim the VAT that you paid on those raw materials.  

If you’re exporting goods to the EU, the rules are different.  

Since the UK left the EU, there are now additional requirements that you need to meet to export goods to the EU.  

You may need to provide customs declarations, and you may need to pay VAT on the sale.  

Understanding how VAT works on imports and exports is important if you’re a business that buys or sells goods internationally.  

By following the rules and requirements for VAT on imports and exports, you can help ensure that you stay compliant with the law and avoid any potential penalties or fines. 

For more information on imports and exports, get in touch with our VAT experts today.