VAT Implications doing business with UK customer, producing the order in China

Question

We have set up a footwear company where we are designing and producing orders for UK brands.

I have a few questions as i am confused about, mainly where VAT is applied etc.

1. I am a UK based company and my customer is a UK brand. We are invoicing them for the order, so my question is, do i add VAT to the invoice? If so they can claim back the VAT on the invoice?

2. The order if on FOB basis so the customer is paying and responsible for shipping to their warehouse.

2. I will place the order with the factory in China, so i am purchasing the order. I am responsible for the order when it arrives into the UK. Do i pay VAT on the order when it arrives into the UK?

Is there an easier way for us to produce the order above and have i got anything wrong?

Thank you

Answer

Answer 1:

If you make taxable supplies (standard rated, reduced rated or zero rated), you have to account to HMRC for the VAT due (assuming you are VAT registered). You will normally charge the VAT to your customers if the supply of goods takes place in the UK. Goods located outside the UK when supplied are outside the scope of UK VAT and you would not charge it.

Answer 2.

If your customers are registered for VAT and the supplies are for use in their business, the VAT is their input tax and they can reclaim in. As a registered person, you can reclaim from HMRC as much of the VAT on your purchases and imports, as relates to the standard-rated, reduced-rated and zero-rated supplies you make. In principle, you cannot reclaim VAT which relates to any non-business activity or to any exempt supplies you make.

Answer

Answer 3.

Where the importation of goods is made by you, or under your directions, from outside the EU, the place of supply is the UK and therefore VAT is applicable. VAT is charged on the importation of goods at the same rate as if the goods had been supplied in the UK.  Paragraph 4.8.2 of VAT Notice 700 – The VAT Guide refers to the place of supply of goods. VAT Notice 702 – Imports explains the import procedures.

Answer 4.

I would suggest that you look at the recommended Notices to establish the best way forward. They can be accessed on the following link: https://www.gov.uk/government/collections/vat-notices-numerical-order

HM Revenue & Customs

Customs International Trade & Excise

www.hmrc.gov.uk/contactus

Answer

Answer 3.

Where the importation of goods is made by you, or under your directions, from outside the EU, the place of supply is the UK and therefore VAT is applicable. VAT is charged on the importation of goods at the same rate as if the goods had been supplied in the UK.  Paragraph 4.8.2 of VAT Notice 700 – The VAT Guide refers to the place of supply of goods. VAT Notice 702 – Imports explains the import procedures.

Answer 4.

I would suggest that you look at the recommended Notices to establish the best way forward. They can be accessed on the following link: https://www.gov.uk/government/collections/vat-notices-numerical-order

HM Revenue & Customs

Customs International Trade & Excise

www.hmrc.gov.uk/contactus

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