How to calculate Duty and VAT

HMRC use a ‘VAT Value Adjustment’ to calculate your import VAT. To help you estimate import duty and VAT please follow the example below:

If you pay your supplier £4000 for your goods, the UK Duty rating for these goods will come to 3.5%, and the shipping quote is £400. 

UK Duty = 3.5% of £4000 = £140.00

VAT = 20% of (UK Duty + Shipping + Cost of the goods)

So VAT = 20% of (£140 + £400 + £4000) = £908

Therefore the final import value of total duties and taxes payable would be £1048 (£140 for UK Duty as well as £908 for VAT), plus the £400 shipping cost.

How do I pay Duty and VAT?

No matter how your goods are imported, usually the company doing customs clearance will contact you with the amount owed and how to pay.

At Westbound we will declare your goods to UK customs and pay the VAT and Duty on your behalf in order to release them. This means that we will be able to provide you with an invoice of the exact Duty and VAT figures, so you will be able to pay these alongside the shipping via bank transfer before delivery. 

A similar process is followed in the case of importing smaller consignments via a courier company or postal service. As one typically pays the shipping cost upfront, this just leaves Duty and VAT left to pay, which Royal Mail or your chosen courier service will contact you about with instructions on how to pay. They will usually wait for approximately three weeks for the costs to be paid before returning the goods to the sender.

Do I pay Duty and VAT on sample products?

This is dependent on several factors. Duty and VAT relief may be granted on imported sample products if:

• They can only be used as sample products
• Are of a value less than £15 for businesses or £39 for gifts
• Have been sent with the intention of gaining orders for the commercial product they represent (ie. are not fully functional)

Currently goods with a commercial value (total of goods value, shipping cost, duty, and insurance) of more than £15 are subject to VAT. For further details, visit HMRC’s website. 

In order to be considered for Duty and VAT relief, the products must meet the outlined requirements or else risk being seized. They need to do at least one of the following:

• Have the product defaced by the supplier
• Make sure the product is permanently marked

The following products are excluded from duty relief:

• Products that can be used beyond just being samples
• Products intended for consumption

In circumstances where customs consider a product to be a sample, thereby relieving the product of duty, it will also be relieved from VAT.

Import VAT explained

Import VAT on goods from outside the UK is charged on all the costs to buy and get the goods into the UK.

The supplier won’t ask you to pay VAT on the products, as you’ll be required to pay it on the import. Here’s how you can estimate the VAT you will need to pay once the goods have been cleared through customs:

VAT on Taxable Import = 20 % of ([Cost to buy your goods] + [UK Duty] + [Shipping Cost & Insurance])

In reality, VAT is calculated differently as any two companies importing identical products for the same cost are required to pay the same Duty and VAT, even if the shipping costs vary. HMRC use VAT Value Adjustment. The shipping cost to get the goods to the UK border is added to a VAT Value Adjust figure which depends on the size of the shipment – this is an average of UK charges to clear and deliver the goods into circulation within the UK.

Less than container load (LCL) shipments’ minimum VAT Value Adjustment figure is £170, whilst full container load (FCL) shipments sit at £550 and Airfreight shipments have a £100 minimum figure.

What about VAT on imports within in the EU?

Since January 1^st, 2021, the UK have left the European Union which means we are no longer a member of the single market. There is a trade deal in place allowing for zero duty, but only if the goods are originating from the EU or UK (depending on the direction of travel). Import VAT is also a requirement, although to help with cash flow the government have introduced a PVA scheme (Post Vat Accounting) which means you can authorise Westbound Logistics to declare your import entry as ‘PVA’, and your VAT is not payable up front as it traditionally used to be. Instead, it’s simply accounted for on your company VAT return. (Only applicable to VAT registered companies). 

What if I’m VAT registered?

If you are VAT registered, ensure that you use the EORI number linked to your VAT number. Under these circumstances, you can claim back any VAT paid when importing goods for your business to the UK using your VAT return. (Unless you opted for PVA Post Vat Accounting) 

When declaring your EORI number to UK Customs, if it is linked to your VAT number then you will received a certificate (C79) from HMRC as evidence that you have paid import VAT. C79 certificates are sent out monthly for each shipment to the address registered to your VAT number, and you should expect to receive them on the 24th of the month subsequent to your import.

In the case where you have misplaced your C79 form, you can contact HMRC who will be able to dispatch a replacement within 2-3 weeks. For further details please contact the VAT Central Unit Microfilm Section (HMRC).

You can discover more information regarding VAT payable on imports here. 

Tariff Codes

A tariff code is required to declare imported products to UK customs.

For each product being imported, customs tariff classification codes (sometimes referred to as HS codes, commodity codes, or TARIC codes) are used to identify and assign a duty rating. You are legally liable, as the importer, to make sure that the right tariff code is used. Try to avoid mistakes in paying what you owe, as these can lead to fines and delays.

Having the correct commodity code for your products will enable you to know:

The correct duty and VAT ratings for your product.

If, when importing from certain countries using the General System of Preference (GSP), you may apply for a preferential duty rating

Whether an import licence is required (for plant/animal/hazardous products etc)

If there are anti-dumping duties that apply in the case where goods are exported below domestic value.

How much duty will I have to pay when I import goods? Read on for further information on calculating the duty percentage with our guide below.  

Identifying UK Duty using the Tariff

Your supplier will sometimes assist, but don’t forget to check the tariff code because global systems are organised similarly, but the codes aren’t necessarily identical.

Our tips for locating a tariff code are:

1. Using the government’s ‘Search the tariff’ feature – simply type in your product and it should give you the relevant tariff code.
2. Try the A-Z of Classified Goods and search alphabetically to help narrow down your options.
3. Search the sections. 
   1. Click the relevant title; your products should automatically fall into one of these
   2. You will be directed to some numbered chapters, which are each broken down into subsections.
   3. Finally, you will have a series of options and related codes – check the bold descriptions, which may offer one final product type option.

There should be an outline for you to see duty percentage as you click through to the tariff code. To check if there are any necessary measures when importing these items, click the ‘Import’ tab for details on anti-dumping statistics.

We would recommend emailing HMRC if the code is not clear so they can give you a code. Find out how.

You can apply for a Vending Tariff Information (BTI) ruling if you want customs to make a legally binding decision on the correct classification of your goods.

For expert advice in your quest for the correct tariff code please do not hesitate to get in touch.

Anti-Dumping Duty

Anti-dumping duty is charged on goods being ‘dumped’ in the United Kingdom. ‘Dumping’ is when foreign exporters sell goods abroad for a price below their local retail cost. They often do this in order to offload stock faster by exporting, but if not regulated it can have a detrimental effect on the importing country’s domestic markets. You may have heard of ‘Trump Tax’? That, is basically an Anti-dumping tax. 

In an effort to ‘counter-veil’ imports that could damage the UK industry, the anti-dumping duty measure is also levied by the EU. This duty raises the expense of importing individual products, which the intention being that it will increase domestic trade in specific goods that they believe need a drive in the right direction or to sustain an established domestic industry.

Anti-dumping duty can be incredibly high and we have seen estimates that have levied more than fifty percent of the value of cargo. Anti-dumping duties were imposed on goods such as bikes, solar panels, and ceramic tableware when imported from China. Click here for the latest on anti-dumping duty measures.

Anti-dumping duty levels are calculated by taking several factors into account. The main purpose of enforcing anti-dumping duties is to make sure that the goods being imported cost the importer the same as they would have cost the exporting country’s local trader. This makes it less attractive for UK importers to routinely import dumped goods. In certain cases such as China, it is difficult to enforce anti-dumping due to meet their ‘market rates’ since they are considered to be a ‘government-backed’ economy and don’t have market economy status. 

As a result, EU/UK leaders are using the market rates of an economy close in size to that of China, which is becoming increasingly difficult to find. America is routinely chosen as the analogue market, a move that many have found unfair due to the incredibly high cost of labour in America which makes it impossible to compare.

If you believe a certain product is being dumped in the UK you can report this yourself. If you can provide sufficient evidence that this case of ‘dumping’ has a negative effect on UK producers, call the EC Trade Defence Helpdesk on 0032 22 98 78 73 to initiate your complaint.

In certain cases there are ways of avoiding the anti-dumping duty. To find out more, you can call HMRC, or check the ‘Import section’ of their website. If you are struggling to find what you’re looking for, please do get in touch. 

The GSP Scheme: How you can save on Duties

The GSP scheme is a fantastic way to save on your imports. The Generalised System of Preferences (GSP) scheme is an EU directive that allows imported goods to be valued lower or even duty-free in some countries. This scheme enables businesses in developing countries to trade internationally on a wider scale. Since Brexit, in most cases a GSP is still valid but it’s expected a new form will be used to replace this during the initial 6 month bedding in period. Your local Chamber of Commerce will be able to guide you with changes.

Although fairly complex, it is a great way for UK importers to reduce their purchase costs and consequently raise their margins and place you ahead of your competitors. 

Where does this apply?

In light of the substantial number of manufacturers, the main country worth nothing is India. Other countries entitled to GSP preferences include:

• 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

You can also expect enhanced reductions from:

• Bangladesh
• Bolivia
• Cambodia
• Costa Rica
• Ecuador
• El Salvador
• Georgia
• Guatemala
• Mongolia
• Myanmar/Burma
• Nepal
• Pakistan
• Panama
• Paraguay
• Peru
• Yemen

For a full list, please click here.

How much of a discount should I be getting?

This is dependent on the typo of goods and where they are being imported from, but they can be checked here on the EU website. Bear in mind, this may change for the UK during, or after the lead up to June 2021 as a result of departing the EU. 

How does the reduction work?

You must ask your supplier for a Form A (Certificate of Origin) if your shipment is eligible for the reduced. UK Duty rate under the GSP scheme. To prove its validity, the certificate must be stamped and signed by a relevant government authority in the exporting country in order to be declared eligible for the GSP scheme. The countries within this scheme are often subject to change. Click here for HMRC’s GSP page.