HMRC announcement on dealing with import VAT on goods imported by those not owning the goods

Wed 08 May 2019

HMRC has issued a business brief (Brief 2/2019) indicating it has become aware of incorrect VAT procedures being operated at import, by those not owning those goods.  This will affect toll operators and those who sell goods just before they are imported into the UK.  The brief explains the correct treatment

HMRC accepts that as previous guidance was not clear on the correct procedure, businesses importing goods on behalf of others in these situations have been acting in good faith. HMRC will not pursue historical VAT deduction where the VAT could have been recovered in full by the owner of the goods at the time of importation as long as there is no risk of duplicated claims.  This will apply to any affected businesses that meet all the qualifying criteria:

• VAT deductions were made in genuine error, through misinterpretation of the legislation or guidance;
• the owner of the goods would have been entitled to full import VAT recovery;
• HMRC are satisfied that there has been no VAT deduction by another person.

From 15 July 2019, HMRC will only allow claims for input tax deduction made using the correct procedures. This allows an appropriate transitional period for businesses to make any necessary changes to ensure the correct procedures are used going forward.

This may require changes in procedures by affected businesses.  To discuss the implications of this development for your business, please get in touch with a member of the Mazars indirect tax team.

Further detail on the incorrect procedures

The clarification in the Brief applies to:

1. Toll operators that incorrectly reclaim import VAT that has been paid on behalf of a foreign owner.

Toll operators are businesses that act as importers on behalf of overseas businesses.  These businesses do not take ownership of the goods and do not resell them, but may perform services and distribute goods for the foreign owners.  Title to the goods at all times remains with their overseas customers (the owners). However, the toll operator acts as ‘importer of record’ on UK import declarations, pays the import VAT to HMRC and receives the import VAT certificate (C79).  Some of these toll operators have been reclaiming the import VAT on their own VAT returns.  This is incorrect.

The correct procedure is for the owner to be the importer of record and reclaim the import VAT, either in accordance with VATA 1994 s24 (if registered for VAT in the UK) or under the Thirteenth VAT Directive (86/560/EEC).

2.  Where legal title to the goods has passed before import into the UK.

Some businesses sell on goods just before importing them into the UK so that ownership and title passes to new owners before their arrival at the customs border.  However, the business that sold the goods acts as ‘importer of record’ on UK import declarations, pays the import VAT to HMRC and receives the import VAT certificate (C79).

The correct procedure is for the new owner of the goods to be the importer of record and reclaim the import VAT on the C79 and not the previous owner.