VAT on imports and exports: UK rules after Brexit

Since the end of the Brexit transition period on 1 January 2021, goods moving between Great Britain and the EU are imports and exports, just like trade with the rest of the world. For VAT that means import VAT on the way in, zero-rating on the way out, and customs paperwork in both directions. Northern Ireland follows different rules for goods under the Windsor Framework.

Importing goods into Great Britain

When goods arrive in Great Britain from outside the UK, import VAT is charged on their value, including customs duty and transport costs to the UK, at the same rate as if the goods were sold in the UK: usually 20%, sometimes 5% or 0%.

Import VAT is separate from customs duty. Duty is a cost of the business and cannot be reclaimed. Import VAT can be reclaimed by a VAT-registered business in the normal way, provided it has the right evidence.

You need an EORI number starting with GB to import goods, and most businesses use a customs agent or freight forwarder to make the import declaration.

Postponed VAT accounting

Postponed VAT accounting (PVA) lets a VAT-registered business account for import VAT on its VAT return instead of paying it when the goods arrive. You do not need HMRC’s authorisation; you or your agent simply choose it on the customs declaration and quote your VAT number.

On the VAT return for the period in which the goods were imported:

• box 1: the import VAT due
• box 4: the import VAT you are entitled to reclaim
• box 7: the value of the imports, excluding VAT

For a fully taxable business the entries cancel out, so import VAT never touches its bank account. The figures come from your monthly postponed import VAT statement, which you download from the Customs Declaration Service. Keep the statements as evidence for the reclaim.

Paying import VAT at the border

If you do not use PVA, import VAT is paid when the goods are cleared, either directly or through a duty deferment account, often by the courier or agent who recharges you. You then reclaim it on your VAT return using the C79 import VAT certificate, also available from the Customs Declaration Service. The courier’s invoice alone is not evidence for reclaiming import VAT.

Low-value goods sold to UK consumers

For consignments with an intrinsic value of £135 or less sent from outside the UK to customers in Great Britain:

• no import VAT is collected at the border
• the overseas seller charges UK VAT at the point of sale and must register for UK VAT, or
• if the sale goes through an online marketplace, the marketplace is responsible for the VAT

If the customer is a UK VAT-registered business and gives its VAT number, the seller does not charge VAT and the customer accounts for it under the reverse charge. Consignments above £135 are treated as normal imports, with import VAT due at the border.

Exporting goods

Goods sent from the UK to a destination outside the UK, including the EU, can be zero-rated if you have evidence they have left the UK. That means no UK VAT is charged, but you can still reclaim the input VAT on your costs.

To zero-rate an export you need:

• official evidence, such as the export declaration and movement reference number, or
• commercial evidence, such as transport documents, airway bills and proof of payment

The goods should normally leave the UK within three months of the time of supply. If you cannot get the evidence in time, you must account for VAT at the normal rate, although you can adjust later if the evidence arrives.

Where the customer arranges the export themselves (an indirect export), zero-rating is still possible but the conditions are stricter, and the evidence burden is on you.

Selling goods to EU customers

Since 2021 a sale of goods from Great Britain to a customer in the EU is an export from the UK and an import into the EU. You zero-rate the sale in the UK, and the EU customer usually pays import VAT and duty in their own country.

If you sell to EU consumers and deliver the goods with duties paid (DDP), you may have to register for VAT in the EU country of arrival. For consignments up to €150, the EU’s Import One Stop Shop (IOSS) lets sellers charge EU VAT at the point of sale. Get advice before selling to EU consumers at scale.

Services across borders

The rules for services depend on the place of supply, not where the work is done.

There are special rules for services connected with land, events, passenger transport, hiring of means of transport and some consumer services, so check VAT Notice 741A before assuming a sale is outside the scope.

Northern Ireland

Under the Windsor Framework, Northern Ireland continues to follow EU VAT rules for goods. Goods moving between Northern Ireland and the EU are not imports or exports for VAT, and are reported in boxes 2, 8 and 9 of the VAT return. Businesses in Northern Ireland trading goods with the EU use an XI prefix on their VAT number. Movements of goods between Great Britain and Northern Ireland have their own rules and paperwork.

Common mistakes

• Reclaiming import VAT from a courier’s invoice. You need the C79 certificate or the postponed import VAT statement.
• Forgetting the box 1 entry under PVA. Claiming the VAT in box 4 without declaring it in box 1 overclaims VAT.
• Zero-rating without evidence. If HMRC asks and you cannot prove the goods left the UK, you owe VAT at the full rate.
• Charging UK VAT on services to overseas businesses. For most B2B services this is wrong and the customer cannot recover it.

Frequently asked questions

Do I pay VAT on goods imported from the EU?

Yes. Since 1 January 2021 goods from the EU into Great Britain are imports, so import VAT is due. VAT-registered businesses can use postponed VAT accounting to declare and reclaim it on the same return.

Do I charge VAT on exports to the EU?

No, if you have evidence the goods left the UK. Exports of goods are zero-rated, but you must keep official or commercial evidence of the export.

What is a C79 certificate?

It is the monthly import VAT certificate showing import VAT paid at the border. It is the evidence you need to reclaim import VAT that you did not account for through postponed VAT accounting.

Do I need to register for postponed VAT accounting?

No. Any VAT-registered business can use it by choosing it on the customs declaration and quoting its VAT registration number.

What is the £135 rule?

For goods worth £135 or less sent from overseas to UK consumers, VAT is charged at the point of sale by the seller or online marketplace instead of at the border.