Import VAT deducted as input tax by non-owners

The Government has recently released a brief on the correct treatment for the deduction of import VAT paid by a ‘taxable person who is not the owner of the relevant goods’.

The brief is relevant for non-owners who have reclaimed import VAT on goods imported into the UK, ‘toll operators’ who import, process and distribute goods within the UK, and advisers or agents dealing with businesses that import goods to the UK. An example of this is a business that imports pharmaceutical goods to be distributed throughout the UK for clinical trials.

HM Revenue & Customs (HMRC) have released the brief as they are aware of incorrect treatment by businesses whereby import VAT has been incorrectly deducted as input tax by non-owners of the goods.

In the case of toll operators, for example, HMRC has noticed that a number of them have paid import VAT on behalf of overseas customers and have also claimed a corresponding deduction for input tax, despite there being no provision for this within the UK law.

HMRC are not suggesting that these businesses have knowingly applied the wrong treatment but are clarifying that the correct procedure is for the owner to be the importer of records and reclaim the import VAT.

From 15 July 2019, HMRC will only register claims for input tax deductions if they are made using the correct procedures. This should allow an appropriate transitional period for businesses to make any necessary changes to ensure that the correct procedures are used going forward.

This is a complex area of VAT and as such, anyone who believes they fall into any of the groups mentioned above should take further advice.

Julian Borley, Director of VAT at Milsted Langdon, said: “The brief on import VAT makes it clearer for businesses who are importing goods to the UK.

This is still a complex area of VAT multifaceted sector of VAT, and knowing the regulations for your business is key. If you need more information on issues regarding VAT, get in touch with us today.”

Posted in News.