Deduction of Import VAT by non-owners of the goods

HMRC Customs Brief 2 (11 April 2019) says that HMRC are aware of incorrect treatment by businesses whereby import VAT has been incorrectly deducted as input tax by non-owners of the goods.

The brief calls out two specific situations: Toll operators and resellers. However, the updated guidance appears potentially to catch in addition other “non-owners” including lessees, importers of goods for repair (e.g. where Inward Processing cannot be used), and importers of high value goods such as art for sale (e.g. at auction) in the UK.

From 15 July 2019, HMRC will only allow claims for input tax deduction made using the correct procedures.

 

Comment

Only the owner of the good concerned is entitled to recover the import VAT. There has been considerable confusion in this area and this change in guidance potentially creates VAT recovery problems. 4 Eyes Ltd is the UK and Republic of Ireland member of a major European VAT network. We will be able to assist you with assessing the correct basis for import VAT recovery.

Web based distance sellers using Amazon, Ebay and other digital market places

Tens of thousands of traders using digital market places have registered for VAT in the past year since HMRC made the web sites responsible for policing VAT evasion. VAT registrations were up 31% from the 2017/18 tax year. In 2014/15 only 5000 traders registered. Last year that had increased to 38,000.

HMRC advise that in January 23019, it had “red flagged”, 4600 businesses, mostly in China for failing to pay VAT on online sales.

Merchants are able to use the services of a VAT agent such as 4 Eyes Ltd to register for VAT and thereafter to manage UK VAT compliance. Businesses that fail to VAT register are likely to have their access to these important online markets revoked.

 

Comment

4 Eyes Ltd is the UK and Republic of Ireland member of a major European VAT network. We will be able to assist you with your registration requirements in any EU member state.

EU Triangulation post Brexit

Following Brexit, UK intermediaries will no longer be able to benefit from triangulation simplification when arranging supplies between two different member states. Henceforth, the UK intermediary will need a VAT registration in the member state supplying the goods e.g. goods supplied France – UK – Germany.

Before

German VAT number provided and UK ignored for VAT purposes.

Post Brexit

The UK intermediary will need a French VAT registration. French output VAT will be charged. The UK company will make a zero rated onwards supply.

 

Comment

4 Eyes Ltd is the UK and Republic of Ireland member of a major European VAT network. We will be able to assist you with your registration requirements in any EU member state.