(updated July 2011)
Use of the University's Deferment Account by Freight Agents:-
- Import Duty
- Import VAT
- Requirements for VAT Zero-rating Certificates
- Re-charge of VAT to the Originating Department
- Other costs associated with importing goods
- Returning imported goods for repair
- General Enquiries
Import duty at a rate of between 0% and 8% is payable on all goods imported into the UK from outside the European Union.
The level of duty payable on an item is determined by its classification code. In order to ascertain the level of duty payable on an item, departments should refer to the European Commission website which facilitates the search for a code by inputting a description of the goods. Once the code has been found, clicking on the 'Duty Rates' button will indicate the level of chargeable duty.
In order to ensure that the goods incur duty at the correct percentage (and at 0% if the goods are classified as duty-free), the supplier should be contacted and advised of the correct classification code. They should also be requested to quote this code on the commercial invoice which accompanies the goods' freight documentation. (Note that the commercial invoice is not the same as the sales invoice normally received for goods/services).
Any correspondence with the supplier regarding classification codes should be copied to the Finance Directorate Tax Section (ext 3073).
Most departments should be able to claim relief from paying duty on scientific equipment.
Use of the University's Deferment Account by freight agents
For all goods being imported from outside the EU, the University has a deferment account from which the cost of the duty is debited by the freight agent carrying the goods. The freight agent must obtain permission from the Finance Directorate Tax Section (ext 3073) to debit these costs from the deferment account. It is therefore essential that Finance is furnished with as much information as possible about the import, before the date on which the goods are expected to arrive in the UK.
In addition to the above, the deferment account is also used to debit the cost of any VAT due on the item being imported. Regardless of the location of the supplier and the rate of tax which applies within that supplier's country, if an item being imported is VATable, then the rate of VAT charged on that item will always be the UK standard rate of 20%. Again, as with import duty, freight agents must request permission from the Finance Directorate Tax Section to debit these costs from the deferment account.
If goods are eligible for VAT zero-rating (eg for medical research, etc), ie, VAT to be applied at 0%, then it is imperative that a copy of the order containing the relevant VAT zero-rating declaration is included in the freight documentation which accompanies the goods into the UK. If the declaration is not visible, even if the item is entitled to have VAT charged at 0%, then VAT will be charged at 20% as the freight agent has no way of determining that the item is VAT zero-rated.
Hence, all orders for VAT zero-rated items from suppliers outside the European Union should contain not only a VAT zero-rating declaration, but also a note clearly stating that the original VAT zero-rating documentation should be included with the freight documentation which accompanies the item when it enters the UK.
Sometimes, because it is not feasible to retrieve the the documentation accompanying a freighted item, the freight agent will contact the Finance Directorate Tax Section to obtain a copy of the order containing the VAT declaration. Finance will, in turn, contact the originator. Hence, it is essential that when raising a VAT zero-rated order, the originator who can produce a copy order from Qfis on request.
When a freight agent obtains authority from the University to debit the University's deferment account, this authority is passed to HM Revenue & Customs who, in turn, debit the cost of the duty and VAT, where appropriate, from the University's general bank account by way of direct debit. In the case of VAT, this will be re-charged to the originating unit.
Often, when importing goods, users will find that the final cost exceeds the amount on the original quotation. This can be due to a number of factors, for example, the rate of import duty levied, the cost of insurance of the consignment when in transit, the cost of delivery from the point of import to the user's department, etc. For this reason, it is essential that users ensure that they are aware of what exactly is included in the quotation received from the supplier.
In cases where goods are returned to their supplier/manufacturer outside the European Union (eg, for repair), then Outward Processing Relief (OPR) is required for the re-importation of goods to the UK.
When an item is returned to its supplier, the exporting agent must be informed by the unit that the item is travelling under temporary export for repairs to be carried out and returned to the UK. The exporting agent should then complete an OPR form on the unit's behalf, or give instructions on how an OPR application form should be completed.
After the repair has been carried out and the goods arrive back to be imported again into the UK, a fully completed OPR form will act as proof that VAT and import duty have been paid on the item's first importation and will therefore ensure that the cost of any VAT and duty due again on re-importation is waived.
Unless agents are made aware of the item's return, they will assume the export is final, ie that the goods will not return to the UK. It is therefore essential that the unit informs the agent from the outset to ensure the necessary paperwork is completed.
If, after export, the supplier decides to replace the faulty goods instead of repairing them, it should be noted that VAT is due on the full value of all new replacements.
If repaired goods are not returned in one single consignment, then the agent must be informed of this to enable them to inform HM Revenue & Customs who will note the quantity of goods being imported and the quantity which remains to be imported. (This paperwork must be presented to HMRC again when the next consignment is imported.)
Any enquiries about exporting goods for repair should be directed to the Finance Directorate Tax Section (ext 3073).
General enquiries on importing goods from outside the EU and on VAT can be directed to HMRC Business Advice Unit, tel: 0845-010-9000.