UK l Changes to VAT Treatment for Recovery on Imports From 15th July 2019

From 15th July 2019, HMRC will no longer allow businesses’ claims for import VAT if they are not the owners of the related goods.

HMRC has become aware of incorrect treatment by some businesses whereby import VAT has been incorrectly deducted as input tax. Under newly released guidelines, HMRC has clarified the correct procedures for the deduction of import VAT on goods when a business imports on behalf of their customers who own the goods.

Under current practice, certain intermediary companies such as those involved in processing semi-finished goods (like pharmaceuticals), don’t take ownership of the goods or resell them. But, they do still act as importer of record, pay the import VAT on behalf of their overseas customers and receive the import VAT certificate.

HMRC knows that some of these businesses subsequently recover the corresponding input VAT via the import VAT certificate. However, there is no legal basis for this under UK law and HMRC has confirmed this VAT treatment will no longer be allowed.

The correct procedure is for the owner to be the importer of record and reclaim the import VAT, if UK VAT-registered through its VAT return; or, if not, by making a claim under the non-EU refund procedure.

This change of policy highlights that under UK VAT law, only the person who makes the import may recover the related import VAT. It is important for companies to apply the refund claim rules correctly which means making sure that the supply chains are properly understood and that the correct parties make claims and have documentation to support them.

Accordance offers expert claim management so if you are affected by this development, please do get in touch with us.