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Revenue and Customs Brief 15 (2020) Review of Import VAT deducted as input tax by non-owners


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Revenue and Customs Brief 15 (2020) Conclusion of review of Import VAT deducted as input tax by non-owners

Published 2 October 2020

The purpose of this brief

This brief explains the outcome of the review of the policy outlined in Revenue and Customs Brief 2 (2019), issued in April 2019, which clarified the correct treatment for deduction of import VAT paid by taxable persons that are not the owners of the relevant goods.

Who needs to read this

You should read this brief if you are:

  • a non-owner who has reclaimed import VAT on goods imported into the UK
  • advisers or agents dealing with businesses importing goods to the UK

Background to this brief

HMRC published Revenue and Customs Brief 2 (2019) in April 2019. This restated the long-standing policy of who is entitled to reclaim VAT paid on imports under current UK legislation.

Following the publication of Revenue and Customs Brief 2 (2019) and the end of the transitional period, HMRC and HM Treasury received a number of representations from businesses and business representatives about the application of these rules in specific cases.

HMRC looked at the specific issues raised and conducted a considered review of the policy set out in the brief.

This review is now complete and confirms the policy outlined within Revenue and Customs Brief 2 (2019) is correct.

Review Outcome

The policy, as stated in Revenue and Customs Brief 2 (2019), remains correct.

It is the owner, whose details (EORI) should be shown in box 8 of the import declaration, who is eligible to reclaim the import VAT, either in accordance with:

  • section 24 of the Value Added Tax Act 1994 (VATA) (if registered for VAT in the UK)
  • under part XXI of the VAT Regulations 1995 (SI 1995/2518)

HMRC looked at a number of specific examples raised by various businesses and representatives, these included:

  • agents
  • warehousing
  • goods temporarily imported for repair
  • goods imported for onward lease
  • special procedures


An agent may be given power to act on their clients behalf. They can then enter into contracts with third parties, receiving and issuing invoices in their own name.

Where an agent acts in line with section 47 of the VATA, the agent is treated as importing and supplying the goods as principal.

In these circumstances the agent can reclaim the import VAT as input tax, subject to the normal rules, but must treat the transactions as a supply by them and charge and account for VAT on the onward sale in the normal way.

Customs Warehousing

Businesses such as retailers that source goods from abroad, may on import enter the goods into warehousing and duty and VAT are suspended.

The retailer raises a purchase order at a later date and goods are dispatched from the warehouse and VAT deferred to the retailer’s deferment account. The retailer takes ownership of the goods at the time of delivery to either a distribution centre or their retail premises.

Ordinarily, import VAT and customs duty becomes due when the goods are imported and enter free circulation. Where goods are entered into warehousing import VAT becomes due at the point the goods are removed from the warehouse and enter free circulation.

In the above example, when the goods are released from the warehouse into free circulation the import VAT becomes due. Where a retailer uses their own deferment account and reclaims the import VAT, this is incorrect.

Retailers have expressed a concern that following the correct procedures will result in a large number of overseas suppliers becoming liable to register for UK VAT and that this would threaten the supply chain.

A solution to this would be for the retailers to take ownership of the goods prior to the goods being removed from the warehouse and prior to entry into free circulation. This would allow the retailer to both act as importer of record and recover the import VAT. There is no legal issue preventing a sale of the imported goods whilst within the warehouse regime and this would remove the need for overseas entities to register for UK VAT.

Goods temporarily imported for repairs

There are a number of examples related to goods imported into the UK for maintenance or repair (without a change of ownership) and then subsequently re-exported.

Under special procedures the inward processing procedure may be available if certain conditions are met. This allows non-UK goods to be imported for repair or processing whilst import duty and VAT is suspended.

If the goods are released from inward processing to free circulation, customs duties and VAT become payable. The provider of the repairs simply provides their services of repair.

Goods imported for onward leasing

Goods will be moved from outside the EU to the UK site of the person leasing the goods for the duration of the lease term. It is expected that the goods will be returned to the lessor at the end of the lease term.

The importation of the leased goods and the onward lease are 2 separate taxable events for VAT purposes. When the goods are imported into the UK the overseas supplier incurs the import VAT in respect of its separate onward supply of a leased good.

The person leasing does not take ownership of the leased goods and does not have entitlement to recover the import VAT. They take on the leased good and any input tax incurred in respect of the lease itself would be recoverable. It would be subject to the normal rules, as it relates to the separate onward supply that they receive.

Customs special procedures

Businesses can use customs special procedures to suspend, reduce or claim relief on the payment of customs duties and VAT under specified conditions.

Special procedures include:

  • customs warehousing – allows for goods not in free circulation to be stored without payment of customs duty, and where appropriate excise duty or import VAT, in a customs warehouse.
  • inward processing – allows for the payment of customs duties and import VAT to be suspended on imported goods whilst processing is taking place.
  • outward processing – allows for the temporary export of goods for processing or repair, and to re-import the processed products whilst retaining domestic status or with partial relief from import duties.
  • temporary admission - allows for businesses and individuals who are established outside of the UK to be authorised to import goods with total or partial relief from customs duties and other charges because of the specific use to which the goods will be put
  • authorised use - allows for reduced or nil rates of customs duty on certain imported goods, provided they are put to a prescribed end use.

However, some businesses, for administrative purposes, choose not to apply the relevant special procedure but choose to pay the import taxes applicable at import.

If a business chooses not to use a special procedure, then the standard import procedure must be followed, and any import VAT must be accounted for and deducted by the correct entity.

Postponed VAT accounting

From 1 January 2021, UK VAT registered businesses will be able to use postponed VAT accounting to account for import VAT on their VAT Return for goods imported for use in their business from anywhere in the world.

Where a business initially declares goods to customs warehousing or into some other customs special procedure, they can use postponed VAT accounting when they submit the declaration that releases those goods into free circulation.

Businesses do not need to be authorised to use postponed VAT accounting, they simply make the appropriate entry on their customs declaration.

Ordinarily, postponed VAT accounting is not mandatory and businesses can start to use it at any time after 1 January 2021.

However, businesses must use postponed VAT accounting if they import non-controlled goods from the EU to Great Britain from 1 January 2021 to 30 June 2021, and either defer their supplementary customs declaration, or use simplified customs declaration process where authorised and make an entry in declarants records.

As with existing processes, it is the owner of the goods who is using the goods in the course of their business who can use postponed VAT accounting. It means they can declare and recover import VAT on the same VAT Return, subject to the normal rules on input tax deduction.

For businesses who currently import goods from non-EU countries, this relieves them from having to pay for the import VAT upfront through their deferment account. Non-owners cannot use postponed VAT accounting.

Find out more information about postponed VAT accounting,

What you need to do

Revenue and Customs Brief 2 (2019) allowed a transitional period for businesses to put in place correct procedures up to 15 July 2019.

This transitional period has now ended and HMRC will only allow claims for input tax deduction made using the correct procedures.

A claim under Part XXI of the VAT Regulations 1995 (SI 1995/2518) can be made provided there is no other VAT relief available at import.

About the Author

© Crown Copyright 2020.

A licence is needed to reproduce this article and has been republished for educational / informational purposes only. Article reproduced by permission of HM Revenue & Customs.

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Article Published/Sorted/Amended on Scopulus 2020-10-02 14:22:34 in

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