Duties Taxes to UK Customs

Duties Taxes to UK Customs

Duties Taxes to UK Customs When buying goods from outside the E.U, you have to pay duties and taxes to U.K. Customs to release your products into the country. The vast majority of shipments are subject to U.K. Duty and VAT, and these are the two main costs that you should understand before importing from overseas.  

Duties Taxes to UK Customs
Duties Taxes to UK Customs

U.K. Duty

The amount of U.K. Duty required to pay depends on the declared value of the goods and the type of product you’re importing.  Each product is given a different duty rating/percentage.  To find out the percentage you’ll have to pay for your product, you can either ask us, and we’ll try to find the most appropriate heading for your goods, or you can use the online tariff at UK Custom.

VAT on an import

When a shipping quote says “plus U.K. Duty & VAT”, don’t think that the VAT is on the shipping price; it’s actually VAT on the taxable import.  If you buy goods from outside the E.U., you won’t pay VAT to the supplier, but that doesn’t mean you won’t have to pay it at all.  The taxable import on which VAT is payable is the amount that you pay for your goods, plus the shipping cost, plus the U.K. Duty. So you are effectively paying VAT on everything that it costs for you to buy the goods and get them into circulation in the U.K.

Duty and VAT Estimator

We’ve simplified the calculations, so it’s easy for you to estimate the U.K. Duty & VAT you’ll have to pay and give you an example to work with.  In reality, HMRC use a figure called a “VAT Value Adjust” and don’t work from the full shipping quote (which also affects the U.K. Duty), but for a good estimate, you can follow this example or use our calculator:

If you pay your supplier USD 3000 (let’s call it £2000) for your goods, the U.K. Duty rating for these particular goods is 3.5%, and the shipping quote is £300 then:

UK Duty = 3.5 % of £2000 = £70.00

VAT = 20 % of (UK Duty [£70] + Shipping [£300] + Cost of the goods [£2000]) = £474.00

Therefore the total duties and taxes payable to import these goods would be £544.00 (£70 for U.K. Duty and £474 for VAT) in addition to the £300 shipping cost.

  • How to Pay Duty and VAT If you’re uncertain about how to pay the Duty and VAT you owe to HMRC for your import, don’t be – it’s easy.  However you import your goods, the company who does the customs clearance will most likely contact you to confirm how much you owe and how to pay it. When importing with Shippo, we’ll declare your goods to customs and pay the U.K. Duty and VAT on your behalf to have your consignment released.  At this point, we’ll have the exact U.K. Duty and VAT figures and will forward them to your freight invoice.  You’ll then pay the Duty and Import VAT along with the shipping via bank transfer, in one fell swoop before delivery!  This facility is included as part of the service (most companies charge an extra fee). When importing samples or smaller consignments via the postal service or a courier company, it’s not dissimilar.  As you will probably have paid the shipping cost up front, you’ll have the Duty and VAT to pay.  The company, be it Royal Mail, Parcelforce etc., will contact you to let you know how to pay the Import Duty and VAT for your shipment.  They’ll normally wait for about three weeks for you to pay the costs, after which they can return the goods to the sender.
  • Duty and VAT on sample products There is no definitive answer on this as it is very dependent on a few factors. Usually, there would be duty costs when importing goods from China, India, Taiwan, and the USA, but there are some cases where Duty and VAT relief is granted. Duty and VAT relief can be granted on a sample of a product if:
    • Once imported, they can only be used as sample products.
    • Are of negligible value (less than £15 for businesses or £34 for gifts)
    • Are intended to gain orders for the commercial product they represent (i.e. are not fully functional)Customs may change their exact figures. Still, at the time of writing, goods with commercial value (goods value + shipping cost + duty + insurance) of more than £15 are liable to VAT.  There is a higher threshold for U.K. Duty and goods with a commercial value of more than £135 (unless the Duty comes to less than £7) are also liable to U.K. Duty.  The exact figures can be found here on HMRC’s site.
    • It is not as simple telling customs that the goods are a sample. Customs set out requirements of those importing ‘sample products’, and may seize the goods if they are not met. The requirements when importing a product from overseas for sample purposes are to do one or more of the following:
      • have your supplier tear, perforate, slash or deface the product
      • Ensure the product is permanently marked products that are excluded from duty relief include:
      • Products that can be used as anything other than samples
      • Products intended for consumption customs relieve the product of duty due to it being seen as a sample, they will also relieve the product of VAT.
    • “Import VAT” in Demystifying Detail VAT on an import from outside the E.U. is not only charged on the cost to buy the goods.  You’ll pay VAT on all the costs to buy and get them to you in the U.K. When you’re buying products from outside the E.U., your supplier won’t ask you to pay VAT on the products.  Before you jump up and down with excitement, this isn’t the loophole you’ve been waiting for to get one over on HMRC!  If you have to pay VAT when buying the same products in the U.K., you’ll have to pay it on the import too, but it’s a bit more complicated than that. HMRC try to make VAT a fair playing field for all.  If you buy a taxable product from the shop at the end of your street, you have to pay VAT on the retail price.  However, this price includes all the costs to get that product onto the shelf.  As a result, import VAT is not as simple as paying VAT on your overseas supplier’s price. Ahh, my brain hurts, give me an overview! When importing products from outside the E.U., here’s how you should estimate the VAT that you’ll have to pay once the goods are cleared through U.K. Customs: VAT on Taxable Import = 20 % of ([Cost to buy your goods] + [UK Duty] + [Shipping Cost & Insurance]) Here’s an example for you to establish the approximate figure.  If goods are bought from China for £5000, and they are subject to £250 UK Duty. The shipping quote to your door is £500 then the VAT due would be approximately £1150: VAT = 20 % of (£5000 + £250 + £500) = £1150 The detailed explanation, In reality, the principle above is correct, but the way it’s worked out is slightly different.  This is because any two companies importing identical products purchased for the same amount should pay the same Duty and VAT figures.  It wouldn’t be fair if one company was in the Scottish Highlands and another was next door to the port in Felixstowe or Southampton.  The company next to the port of arrival may pay £200 less for delivery of a shipment than the company in the Highlands. 
    • That would mean a £40 difference in the VAT that they paid…  HMRC have thought of this already! Rather than the full door to door shipping cost being used for the VAT calculation, HMRC uses something call VAT Value Adjustment.  When calculating the VAT that has to be paid, the shipping cost to get the goods to the E.U. border is taken (only part of the shipping quote).  This is then added to a VAT Value Adjust figure that depends on the size of the shipment.  It’s supposedly an average of U.K.
    • Charges to clear and deliver the goods into E.U. circulation. Less than container load (L.C. L) shipments have a minimum of £170 for the VAT Value Adjustment figure, full container load (FCL) shipments have a £550 VAT Value Adjustment figure and Airfreight shipments have a £100 minimum figure. … And relax, that’s the tough bit out the way! VAT when importing from within the E.U. Goods travelling within the E.U. is not liable for VAT in the same way as it’s a single market.  HMRC have more information about VAT within the E.U., but the only VAT that a shipping company will charge when importing products from within the E.U. is VAT on the carriage itself. What about me, I’m VAT registered? If you’re VAT registered, you still have to pay the VAT as detailed above, but you can claim back any VAT that you pay when importing goods (for your business) to the U.K. 
    • You can do this through your normal VAT return under normal rules. HMRC will generally send you a certificate (form C79) as evidence that you’ve paid import VAT.  C79 certificates are issued monthly. You can find more information about the VAT payable on imports here.  HMRC view the ‘E.U.’ as the VAT (fiscal) territory of the E.U., which is different from the Customs territory of the E.U. The countries and territories, which make up the VAT (fiscal) territory of the E.U., are listed here.
    • Tariff Codes When importing goods to the U.K. from China, India, the USA or anywhere else outside of the E.U., you will need a tariff code to declare the products to U.K. customs. Customs tariff classification codes (sometimes referred to as H.S. codes, commodity codes or TARIC codes) are used to define and allocate a duty rating to each product being imported.  
    • As the importer, you are legally responsible for ensuring the correct tariff code is used.  Customs don’t take too kindly to importers bringing goods into the country without paying exactly what they owe; mistakes can lead to fines and delays. Having the correct commodity code for your goods will allow you to know:
      • The correct duty and VAT ratings for your product
      • If you can apply for a preferential duty rating when importing from certain countries (using the General System of Preference (GSP))
      • Whether you need to obtain an import license (for plant/animal/hazardous products etc.)
      • Whether anti-dumping duties apply (where goods are exported below the domestic value), Want to know how much U.K. Duty you’ll have to pay when importing your goods?  Use the below guide to the U.K. Duty Tariff to identify the duty percentage and then use our calculator to get the figures. Using the Tariff to get a Duty Rating To classify your goods, you’ll need to make use of the Tariff.  Occasionally your supplier will help you out but don’t forget to check the tariff code as the global systems are structured similarly, but the codes aren’t always identical. Here are our tips for finding a tariff code:
      1. Try the ‘Search the tariff’ – this is the golden bullet!  If you type in your product and it gives you the link to a tariff code that’s obviously correct, you have to wave your hands in the air like you don’t care!
      2. Try searching the tariff alphabetically – this may help narrow down your options.
      3. Go through the sections – the nuclear option, as it can be a minefield; here’s what we’d do:
      • Click on the title of the main section; your goods should fall naturally into one of these.
      • You should be directed to some chapters which are numbered. Click on the most appropriate chapter.
      • More numbers! You’re getting closer – use the same principle to click through to the headings.
      • Finally, you should have a list of options and associated codes (to the right); be careful which you chose, look at the descriptions in bold first.
      • Under the bold description, you may have one final option to choose exactly what type of product it is. When you finally click through to the tariff code, there should be an overview for you to see the duty percentage. Click the ‘Import’ tab to check whether there are any measures when importing these products from the country that you are/intend to import them from. When the code is not clear-cut, we would suggest filling out the form at the bottom of the page, and we’ll pass it on to HMRC so they can send you a rating. If you’d like customs to make a legally binding decision on the correct classification of your products, you can apply for a Binding Tariff Information (BTI) ruling. We are more than happy to help you in your search for the correct tariff code, so feel free to get in touch for some expert advice.
    • What is Anti-Dumping Duty? There are several reasons why we mentioned above to check the ‘import’ tab once you have found your tariff code. Naturally, it would help if you did this to ensure that there are no nasty surprises that can pop up along the import process that can and should be made so simple.  One of the things you should be looking out for is an ‘Anti-dumping’ import duty percentage. Anti-dumping duty is imposed on imports being ‘dumped’ in the U.K. and elsewhere within the E.U. ‘Dumping’ is when foreign exporters sell goods abroad at a price lower than their local market rate.
    • They may do this to offload stock faster by the exporter but can have a damning impact on the domestic markets of the importing country if not controlled. The E.U. also imposes the Anti-dumping duty measure in an attempt to ‘countervail’ imports that could harm the U.K. industry.  This duty increases the cost to import particular products.  The idea is to boost domestic trade on particular items that they feel need a push in the right direction or to maintain an existing domestic industry. Anti-dumping duty can be extremely high, and we have seen figures imposed that shoot to way over 50% of the value of the cargo. Products such as bikes, steel, and graphite products have had anti-dumping duties imposed on them when imported from China with bicycles the highest percentage (48.5%). These are just a few examples of the products in which the E.U. have imposed this scheme. Anti-dumping duty levels are calculated by taking many things into account.
    • The primary aim of imposing the anti-dumping duty is to ensure that the goods being imported will cost the buyer (at very least) the same as they would have cost a local trader in the exporting country. This makes importing regularly ‘dumped’ products less attractive to E.U. importers. In some cases (particularly China), it is difficult to impose the anti-dumping duty to meet their ‘market rates’ as they are viewed as a ‘government-backed’ economy and don’t have market economy status. E.U. chiefs, therefore, use the market rates of an economy similarly sized to China, which is becoming harder and harder to find.
    • America is regularly selected as the analogue market, a decision that has been deemed unfair by many. This is due to Americas extremely high labour costs, making it difficult to compare. If you think a certain product is being dumped in the U.K., you can report this yourself. You will need to have sufficient evidence of the ‘Dumping’ harming E.U. producers and manufacturers, but your report will be considered. You can start a complaint by calling the E.C.
    • Trade Defence Helpdesk on 0032 22 98 78 73. In some cases, there are ways to avoid anti-dumping duty being imposed. If you are importing small quantities of the products that have been hit with the anti-dumping duties, then you may be okay. You can call HMRC or check their website to find out more. The information you need to know will all be on the ‘Import section’ of the relevant pages, but if you struggle to find what you are looking for… feel free to contact us for some guidance. We’ve included more information about Anti-Dumping Duty in our U.K. Customs Walkthrough, so if you would like more information feel free to read it.
    • Duty Reductions with the GSP Scheme Importing goods from overseas can be great for the bottom line, but you must be making as many savings as possible along the way.  The GSP scheme is one of those opportunities. The GSP (Generalised System of Preferences) scheme is an E.U. directive that allows for products being purchased from suppliers in certain countries to be lower-rated or even free from duty. This scheme is in place to allow businesses in developing countries to trade on a wider scale internationally.
    • The scheme, while fairly complex, is a great way for U.K. importers to lower their buying costs and subsequently increase their margins. If when sourcing products and suppliers, you are aware of the opportunities provided by the GSP scheme, you could be making a saving that allows you to push ahead of your competitors. Which Countries? Due to a large number of suppliers manufacturing products, the main country that is worth noting is India. 
    • If you have or are sourcing a supplier, here’s a list of countries that are entitled to GSP preferences: Botswana, Cameroon, Congo (Republic of), Cote d’Ivoire, Fiji, Ghana, India, Indonesia, Iraq, Kenya, Namibia, Nigeria, the Philippines, Sri Lanka, Syrian (Arab Republic), Swaziland, Ukraine, Uzbekistan, Vietnam. Among others, you can expect enhanced reductions from Bangladesh, Bolivia, Cambodia, Costa  Rica,  Ecuador, El Salvador, Georgia, Guatemala, Mongolia, Myanmar/Burma, Nepal, Pakistan, Panama, Paraguay, Peru, Yemen. N.B. Correct at time of writing (There are smaller countries also on the lists, see here): What’s the Reduction in Duty?
    • The rate of duty that you’ll have to pay depends on the type of goods and which country the goods are deemed to have come from.  You can check out how much of a discount you could or should be getting when you import particular products here on the E.U. website: How Does It Work? If your shipment is eligible for the reduced U.K. Duty rate under the GSP scheme, you must ask your supplier for a Form A (Certificate of Origin).  The certificate must be stamped and signed by a particular government authority in the country of export to prove its validity.  With this, the goods can be declared as eligible for the GSP scheme. Countries can be added or removed from the scheme with little notice as a result of the World Bank seeing them as large enough to stand on their own two feet, so it’s best to stay on top of it.  Here’s the link to HMRC’s GSP page.
    • Source: shippo