How to find out about Import Duty or costs

3 MORE YEARS · Mar 26, 2019

Hello Everyone,

I am looking to buy some items from Alibaba for my business. Some of the items will come from China others from USA. I want to find out if there is a way I can find out what my costs will be?

I assume I will have to pay import duty. If so how do I find out how much I will have to pay? Do I have to phone HMRC? Is there an organisation I can call to find out what the rate is? I am new to this so anyone who can point me in the right direction, will be very appreciated?

Thank you.

GraemeL · Mar 26, 2019

Trade Tariffs are here - https://www.trade-tariff.service.gov.uk/trade-tariff/sections

You will pay import duty (i.e. the tarrif) on the cost of the product. Then you will pay VAT at 20% on the sum of (cost of product + import duty + freight + insurance)

3 MORE YEARS · Mar 26, 2019

GraemeL said:
Trade Tariffs are here - https://www.trade-tariff.service.gov.uk/trade-tariff/sections

You will pay import duty (i.e. the tarrif) on the cost of the product. Then you will pay VAT at 20% on the sum of (cost of product + import duty + freight + insurance)

Thanks. Thats what I was also reading from my research online. However, there is one thing I am confused about. If my business is not VAT registered, do I still have to pay the 20% VAT? If yes, why is this?

Secondly, if I become VAT registered, can I claim this VAT back later?

Thank you again.

GraemeL · Mar 26, 2019

3 MORE YEARS said:
If my business is not VAT registered, do I still have to pay the 20% VAT? If yes, why is this?

Yes. Every business has to pay VAT on non-EU imports.

3 MORE YEARS said:
Secondly, if I become VAT registered, can I claim this VAT back later?

There will be some time limit on doing this and I don't know what it is.

If importing is a significant part of your business, you should give careful thought to voluntary registering for VAT.

3 MORE YEARS · Mar 26, 2019

Thank you. Yes importing will be a significant part of the business. Its a business I am considering. So If I was a VAT registered business, then I could definitely claim it back.

PowerForwarding · Mar 28, 2019

Yes being VAT registered you can claim back the import VAT you pay.

HFE Signs · Mar 28, 2019

You can claim back the VAT but you can't claim back the duty, don't confuse the two.

dan19900 · Mar 28, 2019

If you're VAT registered you pay VAT on your sales and claim back the VAT on purchases, if not then you pay VAT on your purchases.

VAT registered= bad unless selling to other VAT registered businesses.

Ray272 · Mar 30, 2019

Gotta get VAT registered when importing and get an EORI number. 20% to claim back from HMRC on import tax.

Ignore this below

VAT registered= bad unless selling to other VAT registered businesses

Mr D · Mar 30, 2019

Ray272 said:
Gotta get VAT registered when importing and get an EORI number. 20% to claim back from HMRC on import tax.

Ignore this below

VAT registered= bad unless selling to other VAT registered businesses

Why do you suggest it should be ignored?

Ray272 · Mar 30, 2019

Exporters can recoup VAT paid on products in the UK which are then resold outside UK regardless of VAT agreements. So if you sell to USA for example, and the stock you sold them you paid VAT on in the UK. It can be claimed back.

Mr D · Mar 30, 2019

Ray272 said:
Exporters can recoup VAT paid on products in the UK which are then resold outside UK regardless of VAT agreements. So if you sell to USA for example, and the stock you sold them you paid VAT on in the UK. It can be claimed back.

Great. What if not selling outside the UK?

Ray272 · Mar 30, 2019

Mr D said:
Great. What if not selling outside the UK?

Here's another question.

If company you sell to in the UK is not VAT registered why is it a problem to charge them VAT?

Mr D · Mar 30, 2019

Ray272 said:
Here's another question.

If company you sell to in the UK is not VAT registered why is it a problem to charge them VAT?

No reason it should be. For the most part I've never known if companies I was selling to were VAT registered or not, it was irrelevant to the transaction for me.

Ray272 · Mar 30, 2019

Mr D said:
No reason it should be. For the most part I've never known if companies I was selling to were VAT registered or not, it was irrelevant to the transaction for me.

So you should understand why I advised the following:

"Ignore this below"

VAT registered= bad unless selling to other VAT registered businesses

Mr D · Mar 30, 2019

Ray272 said:
So you should understand why I advised the following:

"Ignore this below"

VAT registered= bad unless selling to other VAT registered businesses

Not at all.

You were referring to a VAT registered business selling to a non VAT registered business. In the UK its the same as selling to the public - you charge them VAT.

However that's a long way from whether to become VAT registered. Which I was under the impression the bit you said to ignore was regarding.

Registering for VAT adds to admin, adds to price (not necessarily by 20% but have to show VAT at 20% rate). So say you sell at £10 an item and you are fine with the profit, with competitors also selling at £10. Then you register for VAT. To cover the VAT payments you will have to increase your price - say to £11 for example. Your non VAT registered competitors selling at £10 will now be cheaper than you. The act of registering for VAT has caused your price increase that non-VAT registered don't have.

Or could choose, perhaps unwisely, to keep price the same and pay the VAT element to HMRC out of your profits. Instant reduction in profits that may be a considerable percentage drop.

Ray272 · Mar 30, 2019

Mr D said:
Not at all.

You were referring to a VAT registered business selling to a non VAT registered business. In the UK its the same as selling to the public - you charge them VAT.

However that's a long way from whether to become VAT registered. Which I was under the impression the bit you said to ignore was regarding.

Registering for VAT adds to admin, adds to price (not necessarily by 20% but have to show VAT at 20% rate). So say you sell at £10 an item and you are fine with the profit, with competitors also selling at £10. Then you register for VAT. To cover the VAT payments you will have to increase your price - say to £11 for example. Your non VAT registered competitors selling at £10 will now be cheaper than you. The act of registering for VAT has caused your price increase that non-VAT registered don't have.

Or could choose, perhaps unwisely, to keep price the same and pay the VAT element to HMRC out of your profits. Instant reduction in profits that may be a considerable percentage drop.

My response was relative to the content. The guy said it's only good to be VAT registered if your selling to other VAT registered Businesses.

Mr D · Mar 30, 2019

Ray272 said:
My response was relative to the content. The guy said it's only good to be VAT registered if your selling to other VAT registered Businesses.

Really? So was mine.
Good for the OP to have multiple views of the same thing.

Now if the company you sell to is VAT registered then they offset the VAT paid against their VAT collected. There are businesses out there who prefer to buy from VAT registered businesses because the item isn't more expensive.

CHUKTC · Mar 30, 2019

In addition to import duty and of course VAT as discussed above you need to be careful of possible port charges when buying on Alibaba. Obviously I have no idea what you are purchasing but you should check the shipping terms with your supplier on Alibaba very carefully before placing an order. If its DDP then no worries, if its a full container you need to know again if its DDP or CIF - if the latter (which is usually the case with Alibaba) remember you will need to arrange port and customs clearance and UK delivery. If it's shipped by air it's less of a problem but you still need to check the terms carefully. The most difficult senario is a part load by sea. Unless its shipped DDP you are very likely to be faced with very high port clearance costs and you wont know how much these are until the goods arrive (and then t's too late to do anything about it). The seller in China will usually be offered 'free shipping' of part loads by shipping agents who then recover their costs by way of port charges. Beware! There are ways to avoid this ad my advice would be if you are shipping a part load by sea - take independent advice (not from your Alibaba agent) and get help.
Hope this helps.

Ray272 · Mar 30, 2019

Mr D said:
Really? So was mine.
Good for the OP to have multiple views of the same thing.

Now if the company you sell to is VAT registered then they offset the VAT paid against their VAT collected. There are businesses out there who prefer to buy from VAT registered businesses because the item isn't more expensive.

Ok but retailers sell to consumers and a lot of retailers are VAT registered so do you see why I said ignore the comment since in most cases they are supplying consumers. So being VAT registered is not a bad thing even if not supplying other VAT rgd biz.

Mr D · Mar 30, 2019

Ray272 said:
Ok but retailers sell to consumers and a lot of retailers are VAT registered so do you see why I said ignore the comment since in most cases they are supplying consumers. So being VAT registered is not a bad thing even if not supplying other VAT rgd biz.

Its a bad thing in terms of the admin and pricing issues for the business itself.

It is however required to grow your business past a certain point - a £800K business has the potential ability to make much bigger profits than a business kept to £80k. Least you hope so!

dan19900 · Mar 30, 2019

Ray272 said:
Ok but retailers sell to consumers and a lot of retailers are VAT registered so do you see why I said ignore the comment since in most cases they are supplying consumers. So being VAT registered is not a bad thing even if not supplying other VAT rgd biz.

Where did he say he was exporting? I assume he isn't seeing as he didn't bring that key point up.
VAT registered businesses pay more in VAT unless they're selling to businesses or exporting (there you go I added exporting for you).
If you want to pay more tax then crack on.

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How to find out about Import Duty or costs