Clarification on VAT and Tax Obligations for UK LP in International Trade Operations

[Eva Klymchuk]

Greetings!

Here is the situation:
UK LP (not registered for VAT in the UK) purchases goods from a Chinese supplier (VAT-registered) and enters into an agreement with a Chinese logistics operator, which exports these goods to individuals in various countries worldwide (excluding the UK and China) under DDP terms. The logistics operator handles customs clearance, duties, and taxes in the destination country, such as the USA or Israel. UK LP acts as the owner of the goods but does not conduct any business activity within the UK. The questions concern VAT, customs duties, and tax obligations in China, the destination countries, and the UK.

1. How will VAT be applied if UK LP is not registered for VAT, while the Chinese supplier is VAT-registered?
2. If UK LP registers for VAT, will this affect its current tax-exempt status in the UK?

Thank you!

 

[Customs Geek]

I would suggest you need to get some professional tax advice as your question isn’t really something you should be asking a forum to advise on without all the facts of the transactions. The tax and VAT could be complex.
In general terms you should be aware of a few different issues you may need to clarify.

You say the Chinese supplier is VAT registered. I assume you mean UK VAT registered. If so this would only be if they were making direct sales to UK consumers of goods below £135 per consignment.
www.gov.uk/guidance/vat-and-overseas-goods-sold-directly-to-customers-in-the-uk

If they are making sales above £135 they could not charge UK VAT.

Instead customs duties and import VAT would be charged at the uk border. This applies whether the importer is VAT registered or not.

The model you describe means there are two sales one to the uk company and a second from the uk company to the uk end customer.
Therefore the obligation to register for UK VAT and charge uk VAT is likely to rest with the UK company. There is no VAT registration threshold in this case.



UK tax and UK VAT requirements are separate and not dependent on each other.