UK duty and VAT on paid repairs in China
Under HMRC’s outward processing repair guidance, duty covers the repair charge plus return freight and insurance. VAT covers the repair charge, outward and return freight, and duty, excluding insurance as a separate charge. Ask Cambridge China Bridge to help obtain an itemised repair invoice from the factory.
Confirm the repair route before calculating
This guide covers charged repairs and the return of your exported goods using outward processing. Before dispatch, ask your customs agent to confirm the procedure for your shipment and destination. Use sending goods abroad for repair for the wider customs route.
Keep the tax calculation separate from your claim against the supplier. Agree who pays for the work and transport before authorising the repair. Our guide to goods that arrived faulty covers the underlying supplier dispute.
Separate repair, freight and insurance
Ask the factory to itemise labour, repair materials and any other repair charges. Ask the freight provider to separate the outward journey from the return journey and to identify insurance separately. If transport is included in the repair invoice, ask for a breakdown so you do not add it again.
HMRC’s repair guidance treats these costs differently for duty and VAT. Use the following allocation when preparing your worksheet, then ask your customs agent to check it against the declaration.
| Cost | Duty calculation | VAT calculation |
|---|---|---|
| Repair charge | Include | Include |
| Outward freight | Outside the stated repair duty base | Include |
| Return freight | Include | Include |
| Return insurance | Include | Exclude as a separate charge |
| Outward insurance | Outside the stated repair duty base | Exclude |
| Duty payable | Result of the duty calculation | Include |
Calculate duty before VAT
Prepare the duty base by adding the repair charge, return freight and return insurance. Ask your customs agent to confirm the applicable duty rate and calculate the duty payable. Show each input separately rather than applying duty to an unexplained invoice total.
Prepare the VAT base by adding the repair charge, outward freight, return freight and the duty payable. Exclude insurance charges as separate inputs. Apply the applicable VAT rate to that base. Insurance can still affect VAT indirectly because return insurance contributes to the duty calculation, and duty enters the VAT base.
Build a calculation file your agent can check
Keep a worksheet showing the source document for every amount, the currency, any conversion used, the duty base, the duty calculation and the VAT calculation. Attach the repair invoice, freight invoices and insurance breakdown. Reconcile bundled charges before sending the file to your agent.
Keep serial numbers, photographs, the export declaration and the factory’s repair report together so the returned goods can be matched to the dispatch. For the wider document pack, use customs evidence for repair and return. Ask your agent to return the submitted declaration and calculation for comparison with your worksheet.
Stop and recheck if the facts change
Ask the factory to confirm whether it repaired your goods or supplied replacements before arranging the return. Do not reuse a repair-only VAT calculation for replacements: HMRC says replacements are charged VAT on the full VAT replacement value.
If the factory changes the charge, combines freight with repairs or proposes different returned items, send the revised documents to your customs agent before shipment. Also flag any ownership connection with the repairer for review rather than assuming the quoted charge settles the customs valuation.
Frequently asked questions
Is duty charged only on the China repair bill?
No. HMRC’s outward processing repair guidance includes return shipping and insurance alongside the repair charge in the duty calculation.
Does import VAT include freight both ways?
Yes. The repair VAT base includes outward and return freight, the repair charge and duty payable.
Is insurance included in repair import VAT?
Insurance is excluded as a separate VAT input. Return insurance enters the duty calculation, so it can affect VAT indirectly through duty payable.
What should I ask the Chinese factory for?
Request an itemised repair invoice, a repair report identifying the returned goods, and a breakdown of any freight or insurance included in its bill.