UK businesses importing products from suppliers in the EU must pay the Value Added Tax (VAT). The VAT is usually charged at the same rate as if you were buying the same products from a UK based supplier.
This guide explains VAT requirements from the perspective of UK businesses that buy their products from suppliers in the EU. We also explain the different VAT rates, how to calculate VAT, and whether you can reclaim it.
Methodology
We only used information from the following pages published on the official UK Government website:
a. Paying VAT on imports from outside the UK to Great Britain and from outside the EU to Northern Ireland
b. VAT rates on different goods and services
c. VAT rates
d. Trade Tariff: look up commodity codes, duty and VAT rates
e. Working out the VAT value using the customs value of the imported goods
f. Send a VAT Return
g. VAT on movements of goods between Northern Ireland and the EU
h. Accounting for VAT on goods moving between Great Britain and Northern Ireland from 1 January 2021
Supplier Overview
Do UK businesses need to pay VAT on products imported from the EU?
UK businesses must notify the HM Revenue and Customs (HMRC) about products they import from the EU into the UK and pay the import VAT, which is normally charged at the same rate that would apply if you purchase the goods from a company in the UK.
Additionally, you must get an EORI number if you plan to import goods into the UK, because you need it when you complete customs declarations.
VAT-registered businesses can reclaim the VAT that they paid for imported goods.
Which VAT rate applies to goods imported from the EU?
The standard VAT rate for most goods imported from the EU into the UK is 20%. However, a reduced VAT rate of 5% applies to some goods imported from the EU into the UK.
Additionally, goods that are exempt from, or outside the scope of, the UK VAT system do not have a VAT charge.
Examples
- Upholstered seats with metal frame – 20%
- Candles – 20%
- Children’s car seats – 5%
- Electric storage heaters – 5%
- Motorcycle helmets that meet safety standards – 0%
- Children’s clothes – 0%
How do UK importers calculate the payable VAT?
The VAT is calculated on the sum of the customs duty and customs value, which includes the following items:
- Goods value
- Packing costs
- Transportation costs
- Insurance costs
The VAT rate depends on how your goods are rated:
- 20% for standard-rated goods
- 5% for reduced-rate goods
- 0% for zero-rated goods
Conversely, if you know the final price of the goods, inclusive of VAT, you can calculate the VAT by:
- Dividing by 6 for standard-rated goods
- Dividing by 21 for reduced-rate goods
Case study: Standard rate
- Goods value: GBP 10,000
- Packing costs: GBP 500
- Transportation costs: GBP 1,000
- Insurance cost: GBP 200
- Customs duty: 0%
Custom value = GBP 10,000 + 500 + 1,000 + 200 = GBP 11,700
VAT = GBP 11,700 x 0.2 (20%) = GBP 2,340
Total cost = Custom value + Customs duty + VAT = GBP 14,040.
Conversely, if you know the total cost (GBP 14,040), you can calculate the VAT dividing it by 6:
VAT = GBP 14,040/6 = GBP 2,340
Note that there are no customs duty when importing from the EU, due to the UK-EU Trade and Cooperation Agreement.
How can UK importers declare the VAT?
You declare the VAT by submitting your VAT to the HMRC by:
a. Using an accounting software that can work with Making Tax Digital
b. Getting an accountant or agent to help you
c. Using your VAT online account (if you make use of the VAT Annual Accounting Scheme)
d. Declaring it on paper and submitting it by post
Note that you can only use the last option if:
- You cannot use computers because of religious reasons, or
- Your age, disability, or lack of internet access prevents an online submission
You can pay the VAT bill by:
- Using your online banking details to approve a payment through your bank account
- Using a debit or corporate credit card
- Direct debit
Can we reclaim the VAT paid on goods imported from the EU?
Yes, you can reclaim the VAT paid on goods imported into the UK from the EU if you are a VAT registered company, as an “input tax”. In order to do so, you need to provide the import VAT statement.
Northern Ireland VAT
EU to Northern Ireland
The Northern Ireland Protocol aligns Northern Ireland with the EU VAT rules for the movement of goods, even though the country remains under the UK’s VAT system.
In short, you don’t need to pay VAT at the border if you trade your goods with the EU. Instead, you must account for any tax due on your VAT Return. The VAT rates are the same as VAT for identical goods that are supplied within the UK.
Case study: UK VAT calculation (at standard rate) for goods from the EU into Northern Ireland
- Goods value: GBP 45,000
- Packing costs: GBP 2,000
- Transportation costs: GBP 8,000
- Insurance costs: GBP 500
- Customs duty: 0%
Custom value = GBP 45,000 + 2,000 + 8,000 + 500 = GBP 55,500
VAT = GBP 55,500 x 0.2 (20%) = GBP 11,100
Total cost = Custom value + Customs duty + VAT = GBP 55,500 +11,100 = GBP 66,600
Northern Ireland to the rest of the UK
For goods sold from Northern Ireland to the rest of the UK, the seller must charge VAT at the normal UK rates, and show the VAT amount (e.g., 20%) in the invoice.
Case study: UK VAT calculation (at standard rate) for goods from Northern Ireland to the UK
- Goods value: GBP 80,740
- Packing costs: GBP 3,500
- Transportation costs: GBP 6,820
- Insurance costs: GBP 930
- Customs duty: 0%
Custom value = GBP 80,740 + 3,500 + 6,820 + 930 = GBP 91,990
VAT = GBP 91,990 x 0.2 (20%) = GBP 18,398
Total cost = Custom value + Customs duty + VAT = GBP 91,990 +18,398 = GBP 110,388
