HMRC has issued Revenue & Customs Brief 02/19 which seeks to clarify its policy regarding who can act as the importer of record and recover the associated import VAT.
The brief advises that HMRC has become aware of situations where agents and non-owners of goods are acting as the importer of record and reclaiming import VAT. HMRC has confirmed that the correct procedure is for the owner of the goods to act as the importer of record and to seek VAT recovery in accordance with section 24 of the VAT Act 1994.
HMRC accepts that its previous guidance was unclear on the correct procedure, therefore it will not take retrospective action provided the parties involved acted in good faith and there is no risk of duplicated VAT claims.
HMRC’s new policy will be adopted from 15 July 2019. Claims for import VAT recovery will only be permitted where the legal owner of the goods acts as the importer of record and is entitled to reclaim the import VAT.
The clarification represents a significant change for organisations involved in the importation of goods.
How could you be affected?
• If you purchase goods from outside the EU where ownership of the goods passes to you following importation into the UK (for example on incoterms DDP delivered duty paid), the supplier of the goods will be responsible for importing the goods into the UK, and the customer can no longer act as the importer of record for VAT purposes. The supplier may also have a requirement to register for UK VAT.
• If you purchase call-off stock where title to the goods remains with the supplier until you call-off following importation into the UK, the supplier would be responsible for importing the goods and the customer can no longer act as the importer of record for VAT purposes. This could result in wider commercial and contractual issues between the parties. There are customs procedures such as ‘customs warehousing’ which can help to mitigate the exposures.
• If you are involved in work on goods where the goods are temporarily imported into the UK and then exported back to the owner, you should consider the use of VAT Duty relief schemes such as Inward Processing Relief.
Organisations should consider the impact of these changes and make arrangements to ensure contractual terms are constant with the VAT policy and any costs and disruptions are minimised.
We are pleased that HMRC are unlikely to take retrospective action prior to 15 July 2019. If you have received assessments from HMRC within the last 4 years in relation to import VAT recovery, our team are on hand to help with any queries you may have. There may be scope to query assessments where import VAT was reclaimed in circumstances similar to those described in the brief.
This represents a significant change which could adversely affect suppliers and customers in the supply chain both practically and financially. If the UK leaves the EU without a deal, the impact of this change may well be greater.
For more information, please speak to either Martin Keenan within our Indirect Tax team or your usual Campbell Dallas contact.
0141 886 6644
The information in this blog should not be regarded as financial advice. This is based on our understanding in July 2019. Laws and tax rules may change in the future.