VAT on imports and exports in UK

4 min read

Understanding how VAT on imports and exports operates can be a more complex affair than dealing with and calculating VAT domestically.

If your UK-based business exports goods to the European Union or other countries, it’s important you know how this value-added tax works.

Let’s unpack the intricacies of dealing with VAT when exporting or importing goods. This will include the impact of Brexit, VAT rates, rules for Northern Ireland vs. Great Britain, and other important considerations.

What are the VAT rules for import and export of goods?

The VAT rules for the import and export of goods depends on a few factors. This includes where you’ll be exporting or importing, and whether you’re operating from Northern Ireland or Great Britain.

Many UK businesses will be engaged in export or import, so to simplify the matter, let’s break it down into categories.

Do you pay VAT on imports?

If you’re a business from Great Britain (England, Scotland, and Wales), importing from outside the UK or you’re a Northern Ireland business importing from outside the EU, you need to aware of the following:

  • Import VAT is normally charged at the same VAT rate as if you bought the goods from within the UK.
  • You need to inform the HMRC of any imports you undertake to pay any VAT or duties that are due.
  • There are exceptions around the importing of art, antiques, and collector’s items, which attract a reduced rate of VAT.
  • Even if you’re not VAT registered, you’ll still have to pay VAT upon import, but will not be able to reclaim it as input tax.

Accounting for import VAT and VAT Returns

When accounting for import VAT, your business can adopt one of the following methods:

  • You can choose to account for VAT through what’s known as ‘postponed VAT accounting’. This method allows you to report your import VAT and then claim it as regular ‘input tax’ on the same VAT Return. This means you essentially follow the same VAT rules as if you’re operating exclusively within the UK.
  • You can alternately choose to pay this VAT, upfront and immediately upon importation. While temporarily out of pocket, you can then claim this VAT in your VAT Return as per the normal rules.

No matter how you account for import VAT, you need to retain the import VAT statement to reclaim it as input tax.

If you’re importing goods temporarily, to be re-exported within two years, you may be able to avoid import duties.

When importing goods, it’s a wise and popular choice to engage the services of an import or customs agent alongside an accountant to manage the issues around customs, duties, and VAT on your behalf.

Do you charge VAT on exports?

Charging VAT on exports is a simpler affair – you don’t charge VAT on exports from the UK, and can instead ‘zero rate them’ in the following scenarios:

  • You’re exporting goods from Great Britain to any destination outside the UK.
  • You’re exporting goods from Northern Ireland to a destination outside the UK and EU.

Rules around Northern Ireland create different scenarios due to the Northern Ireland Protocol:

  • If you’re exporting goods from Northern Ireland to the EU, regular EU VAT rules apply.
  • If you import goods to Northern Ireland from outside the EU, including Great Britain, import VAT will be due. 
  • VAT will also be due on goods entering Great Britain from Northern Ireland. If you’re importing and exporting goods from Northern Ireland, you’ll need an EORI number that starts with XI. You should also sign up for the free Trader Support Service.

As this is a convoluted and still evolving affair, read more about moving goods in and out of Northern Ireland here. For even more information pertinent to VAT and the Northern Irish Protocol, read here.

How is Brexit impacting my VAT on imports and exports?

The most significant effect of Brexit has to do with Northern Ireland and the new relationship the UK has with the EU. 

Great Britain will be treated differently from Northern Ireland due to the Northern Irish Protocol, with Northern Ireland still paying VAT to the HMRC, but also beholden to EU VAT rules. Great Britain will be generally treated as a foreign entity to the EU.

This is a complex and evolving topic and, with recent trade agreements, it’s exceptionally prudent to engage the services of customs agents and accountants to navigate the complexities of these import and export pathways.

While a customs agent or similar will give you advice around tariffs and customs concerns, they won’t be experts on VAT and VAT accounting, meaning you may have to consult with a business accountant as well.

What we know about VAT after Brexit:

  • You don’t charge VAT if goods are exported from: 
    • Great Britain to a country outside the UK. 
    • Northern Ireland to a country outside the UK and EU.

Do I charge VAT on invoices to Europe? 

If you’re a UK business and supply services to a customer in the EU, then it’s outside of the UK VAT system, so VAT is zero-rated

You don’t need to charge VAT. Instead, your customer will pay VAT on imports under reverse charge VAT rules.