Import VAT recovery and partial exemption
VAT registration does not guarantee full import VAT recovery. Identify what the goods support, attribute exclusive costs and apply your partial exemption method to shared costs. Give your adviser the import evidence and use records before claiming. Discuss the sourcing paperwork with Cambridge China Bridge.
Start with how the goods will be used
Ask your VAT adviser to confirm which activities are taxable and which are exempt before coding imported purchases. Do not infer the treatment from a department name or from whether the customer invoice shows VAT.
Our import VAT guide covers the tax calculation and import evidence. This guide addresses the separate question of how much to recover when your business has mixed activities. Budget for any amount your adviser expects to remain unrecovered.
Attribute exclusive costs before shared costs
Input tax used exclusively for taxable supplies can be recovered in full, subject to the normal recovery conditions. Input tax used for exempt supplies generally cannot be recovered. Goods supporting both belong in the shared, or residual, assessment rather than automatically receiving full recovery.
Prepare an item-level schedule showing the goods, intended activity and supporting explanation. Distinguish separately identifiable stock or equipment from a genuinely shared purchase. Ask your adviser to review the attribution; do not apply a business-wide recovery rate indiscriminately to every shipment.
Confirm the method for shared purchases
Give your adviser the partial exemption method currently used by the business. A special method requires HMRC approval to start or stop using it. If imported equipment supports activities in different ways, ask whether the existing method remains suitable.
Ask the adviser to assess the de minimis rules, rather than assuming a small exempt activity means full recovery. Separately flag any private or non-business use, blocked input tax and overseas sales for review.
Keep import evidence alongside use evidence
Match the import declaration and supplier invoice to your postponed import VAT statement or import VAT certificate, as applicable. Postponed accounting changes the accounting route; normal input tax recovery rules still apply. Use our importer of record guide to review who imports and holds the evidence.
Build an adviser file containing the purchase schedule, import evidence, activity descriptions, taxable and exempt sales reports, method documentation and calculation workings. Add stock allocation records or equipment-use logs where they explain your assessment. Send unresolved differences to the adviser rather than silently changing the claim.
Review the annual position and changes in use
The annual adjustment reviews recovery over the longer period, usually the partial exemption tax year. Ask your adviser to confirm the review timetable and explain any difference from the amounts provisionally claimed.
Record changes from the intended use of imported goods and send them to the adviser for assessment. Keep the original decision and the reason for the change. If import evidence is missing, follow our missing import VAT documents guide while assembling the use records.
Frequently asked questions
Can a partly exempt importer reclaim all import VAT?
Do not assume so. Recovery depends on attribution and the partial exemption assessment. Ask your adviser whether the de minimis rules affect the result.
Does postponed VAT accounting allow full recovery?
No. Normal input tax recovery rules still apply. Give your adviser the postponed statement and the goods-use schedule.
Should I apply the same recovery rate to every import?
Do not do this automatically. Identify exclusively taxable and exempt use before assessing shared purchases under the business's partial exemption method.
What records should I send my VAT adviser?
Send import evidence, supplier invoices, an item-level use schedule, sales reports, method documentation and workings. Include unresolved differences and changes in intended use.