In the relentless pursuit of uncollected import VAT, HMRC’s unyielding stance has stirred waves of concern among our clients, casting a shadow of uncertainty over the landscape of their trading operations.

The issue is particularly relevant to importers who do not  OWN  the imported goods, such as a Toll Manufacturer that imports goods for processing and then subsequently exports back to the owner.  This situation is driving up the cost of sales for businesses that can no longer recover the import VAT on goods they do not own. 

HMRC changed the Policy in 2019 to include a prerequisite that claims for recovering import VAT followed the correct procedures.   

There are three ways to ensure this is satisfied: 

  • The owner of the goods, who is not a UK established business, registers for VAT in the UK and takes responsibility for import, paying and recovering the import VAT.  This would bring additional complications for the non-UK entity, including finding a customs broker willing to act in a joint and severable capacity. 
  • The toll manufacturer implements a special procedure such as customs warehousing or inward processing. These procedures allow you to suspend payment of any customs duty and import VAT liability and discharge it when the finished goods are re-exported. 
  • Another solution is to transfer the ownership of goods during import by exchanging a Toll contract for “Buy and Sell” contract, which also brings complications. 
An image of a man checking goods in a warehouse

Lucy Pringle, Partner at Womble Bond Dickinson, commented:  

Toll manufacturing contracts usually state that risk in the customer-supplied materials transfers on delivery, but that ownership in the materials stays with the customer throughout the processing.  If instead the toll manufacturer buys the materials from the customer, then the contract needs to make this clear.  In addition to the working capital hit, toll manufacturers need to consider any tax and insurance impact, plus whether transferring title in the materials affects the required conversion efficiencies.” 

Act Now:

If you would like to discuss any aspects of import VAT or related matters contact Adam Wood on 0121 403 3901 for a free no obligation conversation.

About Barbourne Brook

Barbourne Brook are a proactive team of customs duty planning experts with a wealth of knowledge and insight in the customs sphere, offering scalable solutions backed by industry-leading technology.

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