Considerations when importing goods into the UK

Importing goods into the UK can be a valuable way to expand your business, strengthen your supply chain and access new markets. However, it may also bring a range of customs, VAT and compliance obligations that need to be managed carefully.

Businesses tend to rely on logistics companies or freight forwarders to address these obligations, however, business can find themselves in a predicament with HMRC whereby thought to the wider obligations have not been considered fully. Understanding these requirements from the outset helps avoid delays, unexpected costs and HMRC scrutiny.

When goods enter the UK, they may be subject to:

• Customs duty
• Import VAT
• Excise duty (for specific goods such as alcohol or tobacco)

The rules when importing goods into the UK are nuanced and complex, such that the VAT position can differ significantly depending on whether the business is established in the UK or overseas, and whether the business is already registered for UK VAT or not.

Understanding customs duty

Understanding customs duty is a critical part of the import process, and it begins with correctly identifying the commodity code for the goods in question. The commodity code determines the duty rate, any import restrictions, and whether preferential tariffs may apply under trade agreements.

Equally important is establishing the correct customs valuation, which forms the basis on which customs duty and import VAT are calculated. The customs value may take into account a variety of things such as the price paid for the goods, transport and insurance costs to the UK border, and certain commissions or packing charges. Care should be taken as there is an industry-wide approach to determine the correct value for customs purposes.

As customs duty is a sticking tax that cannot be recovered, accurate classification and valuation are essential to avoid unnecessary costs and penalties. Errors in either classification or valuation can lead to overpayment, underpayment, delays at the border, or HMRC assessments, making accuracy essential for both compliance and cost control.

Businesses that import regularly may wish to consider using a duty deferment account, which allows duty liabilities to be settled monthly rather than at the point of import, helping to smooth cash flow and simplify administration.

Understanding import VAT

Import VAT is one of the most significant tax considerations when goods enter the UK. Therefore, understanding how import VAT is calculated and the scope of recovery is essential for managing both compliance and cash flow, irrespective if the business is registered for VAT in the UK or not.

Additionally, a common area that businesses tend to overlook, is who within the supply chain is liable to pay the import VAT, which is largely dictated by the terms of trade (incoterms) used to import the goods into the UK. The incoterms dictate where risk is transferred, but also what attributes within the transaction is whose obligations (supplier or purchaser).

Before importing, businesses must ensure they have a valid GB EORI (Economic Operators Registration and Identification) number, as this is required for customs declarations and for HMRC to correctly attribute import VAT and duty liabilities. Without a valid GB EORI number, goods cannot clear the border.

When goods enter the UK, import VAT is charged on the customs value of the goods. For UK VAT‑registered businesses, there are ways to ease cash flow, with the preferred method of accounting for this to be Postponed VAT Accounting (PVA). PVA allows businesses to declare and recover import VAT on the same VAT return, rather than paying it upfront at the point of import. Which is significantly advantageous to utilise for businesses importing regularly or in high volumes.

Importing goods into the UK as a non‑UK Business

Non‑UK businesses importing goods into the UK must carefully assess whether their business activities create a requirement for the business to become registered for UK VAT. Unlike other territories, the UK does not offer a VAT registration threshold for non-UK businesses. This means that any taxable supplies made in the UK generally trigger an immediate obligation to register from the first unit of sale, regardless of the value. Therefore, timing is imperative to avoid the risk of penalties imposed by HMRC.

For businesses not registered for UK VAT, import VAT must be paid immediately at the border and cannot be reclaimed, making accurate valuation and planning even more important.

Another important point is to ensure that the importer of record (IoR) criteria is met, as this is an area that can often be misinterpreted and can lead to increased costs for a business if this is not done within the correct structures.

How Gravita can assist

Importing goods into the UK involves more than simply relying on a logistics company to arrange transport. VAT, customs duties, compliance obligations, and documentation requirements all play a critical role in ensuring the import is not only ‘smooth’, but also is compliant with the various taxes and charges that come into play.

Businesses that are actively conscious of these attributes from the outset and understand how these obligations interact with the business activities, are better positioned to avoid delays, reduce costs, and maintain full compliance with UK regulations.