A Guide To Import Tax

If you are importing into the UK you will want to know what tax you are going to be charged by customs.

Firstly it is important to note there are two types of tax which are quite different and are best treated separately. Import duty is a tax that cannot normally be refunded. Import VAT on the other hand is normally refunded some time after import as detailed below.

Import Duty

All goods that are imported into the UK are classified using what is called a commodity code or HS code which is a ten digit number. This uniquely classifies everything that you could ever import so that means there can only ever be one correct code for your goods. This code will determine the amount of duty you will have to pay at import, normally as a percentage figure. Duty starts at zero and can increase up to 12 percent as levied on many clothing items, or more. Most duty rates are between 0-5% though.
In addition, some counties of origin qualify for a discount, or duty free import. This could be because there is a free trade agreement in place, for example Switzerland or South Korea, or there is a duty discount allowable for certain commodities for developing counties such as Bangladesh. This is called the GSP Scheme (Generalized System of Preferences).

Import VAT

The UK charges a tax at import as well as domestically in common with most nations, but with the notable exception of the United States. Some countries call this a General Sales Tax or GST – it’s all the same kind of tax. In the UK this is levied on most kinds of goods and services at 20%, with some exceptions such as food (zero) or safety equipment (5%).

VAT is paid at import and then for VAT registered traders (most serious importers are) it is refunded by customs several months later. Then when sold on it is charged again, here is an example:

Buy goods for £1000.00
Import into the UK and pay £200 VAT
Get a refund of VAT from customs of £200.00 import VAT
Sell to a customer for £ 1300 + VAT £260 (@20%) = £ 1560
Pay £260.00 VAT to Customs

Every VAT registered trader selling on the goods or using them in the course of their business can claim back VAT paid. So generally the only person who ends up paying VAT with no reclaim is when there is a retail sale.

VAT, Duty & Tax FAQ’s

When is import duty & VAT paid?

Duty & VAT has to be paid before customs clearance and UK customs computer prevents customs clearance until duty & VAT has been paid.

How do I pay duty & VAT?

Normally the a forwarder such as K&L Freight has a special secured account with customs called a deferment account and then re-charges the importer. You can always get you own customs deferment account, but you will need to get your bank to guarantee it, so generally only large companies who regularly import have one.

Alternatively you can pay customs electronically but it goes into a central system which can delay clearance and so delay delivery, thus incur additional costs meaning this is not a popular option. Customs do not accept cheques or debit / credit cards

Are there any other types of duty?

Yes there are. Most people will be familiar with excise duty on alcohol. There are also anti-dumping duties where a company or nation is considered to have produced goods below cost and so special surcharges apply. This is a specialist subject and K&L Freight can advise customers if this is applicable.

What about CAP levies?

This too is a specialist subject to do with levelling the price of non EU foodstuffs to the same price as EU foodstuffs. If this applies to you and you are using K&L freight we will guide you through the process.

Where do I find out what commodity code I should use?

You can look this up yourself, try this link: https://www.trade-tariff.service.gov.uk/sections

I’ve had a look at the commodity codes guide and it seems complicated?

K&L Freight assists its customers to choose the right code, just get in touch with us via the live chat, on the contact form, email or on the phone. We can even assist you getting a legally binding agreement on the code to be used with customs if you want to go down this route.

I might just choose a commodity code that seems very roughly right but has a lower rate of duty. Is this OK?

No it is not. The customs entry is a legal document. You as the importer are responsible for it. You may get away with using wrong code and paying less duty, but customs eventually get round to auditing all importers. If they suspect duty evasion has taken place they will be looking to fine each occurrence at up to £1500 plus the lost duty, plus interest. In addition you will be on their radar screen for a very long time so further imports will get checked and double checked with additional costs for the checks borne by the importer, not customs!

Import duty & VAT seems complicated?

This is one of the reasons companies use K&L Freight, to make use of our knowledge and experience.

If you are shipping from China, india, the USA or any other port, chances are K&L Freight have the vital experience needd to successfully navigate all the tax, duty and import fees applicable and can help you make the experience fast, smooth and easy. Contact us today.