Revenue and Customs Brief 15 (2020) Review of Import VAT deducted as input tax by non-owners
Submit Articles Back to Articles
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),
April 2019, which clarified the correct treatment for deduction of
import VAT paid by taxable persons that are not the owners of the
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
- advisers or agents dealing with businesses importing goods to the
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
The policy, as stated in Revenue
and Customs Brief 2 (2019), remains
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
VAT in the UK)
- under part XXI of the VAT Regulations
HMRC looked at a number of specific examples raised by various
businesses and representatives, these included:
- 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
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
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
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
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.
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
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
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
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
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
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
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
- 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
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
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
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
Find out more information about postponed
What you need to do
Revenue and Customs Brief 2 (2019)
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
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.
Follow us @Scopulus_News
Article Published/Sorted/Amended on Scopulus 2020-10-02 14:22:34 in