VAT and Import Tax

[xuanchen]

Hi,

As this is the first time I've started working in retail, I'm looking for a little advice on taxes to get financial accounts in order. To keep costs down and to learn what is involved myself, I am not considering hiring an accountant.

- What are the taxes involved in importing electronics from China to the UK, and selling them online? I'm talking about cheap electronics that are small such as micro SD and SD cards.

Currently, I have a list of:
Corporation Tax (is there a threshold? How is this calculated?)
VAT (threshold is £79,000, does this mean that we can charge 0% VAT up to this amount? After exceeding £79,000, does VAT have to be paid on all the profits or only the amount exceeding?)
Import tax (no idea how this is worked out, could someone explain)

Thanks

 

[Scalloway]

Corporation Tax is 20% of all your profits, ie sales less cost of goods sold and business expenses.

VAT. If your sales exceed £79,000 you must register for VAT. You must add 20% VAT to the sale price of goods liable for VAT (not all goods are liable for VAT). You can also reclaim VAT charged to you.

 

[xuanchen]

As far as I understand, VAT can only be reclaimed if we are signed up for it. Is this correct?

Is VAT chargeable on the first £79,000 of profits? Do we have to list VAT on all products, regardless of current profits?

-Import tax question still stands.

Thanks

 

[Scalloway]

Yes you can only reclaim VAT if you are regsitered.

VAT is a tax on turnover, not on profits. If your annual turnover is less than £79,000 you do not need to charge it, if your turnover goes over £79,000 you must charge VAT on every sale.

VAT is charged on most goods and services. There some that do not have VAT added to the price because they are zero rated, like food from a shop, and others are exempt.

There is more information on VAT here

http://www.iod.com/guidance/briefings/su-vat

 

[DJR51]

Import VAT is simply a tax paid on importing goods from outside the EU - it's calculated as a percentage of the value of the goods brought into the UK, and the rate of duty varies depending on the type of product. Plenty of websites can be used to work out duty payable - such as dutycalculator.com

Dutycalculator also has a useful summary of how the process works here:

http://www.dutycalculator.com/help_center/Import-duty-and-taxes-explained-in-a-nutshell/

If you have a shipping agent/freight forwarder dealing with your imports, they will handle the paperwork and will usually pay the duty and clearance fees etc on your behalf, and will bill you for the privilege.

 

[Eye 2 Eye Security]

hi, this thread highlights fairly closely what i'm personally pondering, never having imported before, and why i joined this site for to find out more.

outline
I met reps of a Chinese supplier at a trade expo, offering very attractive camera specs. got chatting about direct importing options.

From reading in here about being wary if using small Chinese cottage industries pretending to be large companies, export agents and so on, i think less likely a small time 'box shifter' would send 2 reps to the UK exhibitions due to high costs.

i'm reasonably skilled at subtle interrogation methids using discrete but very searching questions, and i'm satisfied as possible the contact is a true genuine manufacturer/assembler. I'm prepared to gamble on loosing some money on a small order if it goes wrong.

I can buy many types of cameras in the Uk, its not cost but supply consistency that affects me most. I select a model and spec, buy 10 then later i want more due to expansion or service replacements, but that model us out of stock or has been superseded. i suspect more often likely bought in bulk as end if line or line overruns by the UK supplier. What ever the cause it don't suit my style of business to replace with an alternative, when the client has paid for the model i had carefully specified from that supplier.

My plan is to order say 5 sample units, i have checked with the supplier who is happy and keen with this, if all goes well i'll hope to ramp up the sales and so orders, even direct retail them as part if my business.

So what i need are the added costs like import taxes and duties, haulage etc. i am VAT registered so competent in that department for UK, and experienced in using Quickbooks Pro.

One thing i am wary of is having got samples legally, but for whatever reason it don't work out is HMRC noting i've broke my importing 'duck', and will for ever pursue me, as they did for 5 years after i had stopped employing anyone, despite letters from my accountant and solicitors.

i know i have ti get a classification code (from 17,000 choices). i was given a number to call by the VAT advisor, but it is only open between 2pm - 5pm, and is always engages - so what a joke!

 

[Wavecrest Ltd]

My plan is to order say 5 sample units, i have checked with the supplier who is happy and keen with this, if all goes well i'll hope to ramp up the sales and so orders, even direct retail them as part if my business.

So what i need are the added costs like import taxes and duties, haulage etc. i am VAT registered so competent in that department for UK, and experienced in using Quickbooks Pro.

One thing i am wary of is having got samples legally, but for whatever reason it don't work out is HMRC noting i've broke my importing 'duck', and will for ever pursue me, as they did for 5 years after i had stopped employing anyone, despite letters from my accountant and solicitors.

i know i have ti get a classification code (from 17,000 choices). i was given a number to call by the VAT advisor, but it is only open between 2pm - 5pm, and is always engages - so what a joke!

If these units are quite small and you are only ordering five I would get your supplier to send this initial order by courier. The courier company will take care of the customs clearance etc on your behalf and bill you for the relevant duty/VAT.

What you will need to do is get an EORI number from Customs if you are going to be importing. This is quite straightforward and there is no charge. We can are happy to send you an application form and point you in the right direction.

If all goes well and you decide to order larger quantities, ask your supplier to quote FOB prices only so that you can make your own shipping arrangements with a UK forwarder. DO NOT LET THEM ARRANGE SHIPPING ON YOUR BEHALF. You will end up with very hefty UK handling charges etc.

Glen

 

[Eye 2 Eye Security]

Hi Glenn, many thanks for your fast response and informed advice on shipping costs.

if you could email/pm a form i'd be very obliged, been trying to get through to UK customs since 2pm to get those codes, with no luck as yet .

So as i don't waste your time, this all about being prudent and testing the waters first to see if it will be viable, while hoping to develop it if it is.

if you want to send me your estimates of haulage cost based on a few sample weight for future larger order reference, it will be from Futian district, ShenZhen, China to my home Essex, any other heads up please feel free as it will be invaluable to me.

think my email details are in my profile if not i'll add them, i printed them here but post got kicked in preview about live url's rules and post count.

Regs
Alan

 

[Wavecrest Ltd]

Hi Alan,

Will send you a quick DM.

Glen