Sale or return China stock: customs value and VAT
Without a sale, you cannot use transaction value for customs valuation. Have your broker establish a supported alternative, budget duty and import VAT, and confirm who can recover the VAT. Agree ownership, purchase triggers and return costs before shipping. Discuss the supplier's proposal with Cambridge China Bridge.
Establish what the supplier is actually offering
Ask whether you must eventually buy the stock or can return unsold goods without paying for them. Request written terms identifying the supplier, stock owner, importer, selling business and party funding border charges. This guide concerns stock entering free circulation in Great Britain; ask for separate advice for Northern Ireland.
Send the agreement to your broker and accountant before dispatch. A proposed purchase price does not explain whether a sale has occurred. Our guide to consignment stock from a UK seller covers storage, insurance and withdrawal controls; the additional issue here is importing before purchase. Use UK customs clearance for the general clearance process.
Build a valuation file before shipping
HMRC says you cannot use Method 1 where there is no sale and must try Method 2, the transaction value of identical goods. Do not substitute a nominal invoice amount for this assessment. Ask the broker to record the selected method, calculation and supporting documents before the stock leaves China.
Ask the supplier for evidence of comparable sales of identical goods, with product specifications, quantities, dates and delivery terms. If that evidence is unavailable or unsuitable, ask the broker which alternative method and evidence are needed. Provide production-cost records or proposed resale information if requested. Describe the arrangement accurately on the customs paperwork and retain the valuation explanation alongside the customs clearance documents.
Budget border taxes separately from supplier payment
Customs Duty is often calculated as a percentage of customs value. Ask the broker to confirm the commodity code, origin, applicable duty and any additional measures, then calculate the duty against the supported valuation. Keep freight, clearance, storage, insurance and possible return transport visible in your cash budget, even while the supplier's stock remains unpaid.
For import VAT, start with customs value, include duties due and add qualifying incidental expenses up to the goods' first UK destination. Ask the broker to show additions separately and avoid counting costs already included. Give them every onward destination known before import. Use the confirmed product VAT rate rather than assuming all goods have the same rate.
Check VAT recovery against the ownership arrangement
HMRC warns that non-owners have incorrectly deducted import VAT. Do not budget a recovery merely because your business pays the border bill or appears on the declaration. Ask your accountant to assess ownership for VAT purposes under the actual agreement, including your right to use or sell the goods.
Confirm who will account for import VAT, whether postponed VAT accounting is appropriate and what evidence supports any recovery. Keep the declaration and relevant import VAT evidence with the agreement. Ask separately how later supplier invoices, your customer sales and any agency fees should be treated. Ask your accountant how any extended-credit arrangement affects VAT tax points.
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Connect imported stock to purchases, sales and returns
Agree a signed opening stock schedule linked to the import declaration and valuation file. Record product, batch, quantity, location, owner and condition. For each later purchase, record the agreed trigger, date, quantity, price and supplier invoice, then link the customer sale where relevant. Distinguish stock bought for resale from stock sold on the supplier's behalf. Reconcile physical stock with movements and investigate shortages before billing them.
For unsold returns, obtain written authorisation identifying batches, quantities, condition, freight responsibility and the supplier's receipt confirmation. Keep dispatch, export, delivery and settlement records together; use UK export clearance for returned stock for the export process. Budget without a tax refund until your broker confirms an applicable route. Ask whether later invoices or actual sales require any valuation follow-up, and keep that advice with the original entry.
Frequently asked questions
Can I declare a token value because I have not bought the stock?
Do not use a token figure as a substitute for valuation. Without a sale, HMRC says Method 1 cannot be used and Method 2 must be tried. Ask your broker to document the supported value.
Can I wait until the stock sells to budget import VAT?
Budget the import separately from supplier payment. Confirm with your broker how the import VAT will be accounted for, and with your accountant whether your business can recover it.
Can I reclaim import VAT if the Chinese supplier owns the goods?
Do not assume so. HMRC warns about incorrect deductions by non-owners. Have your accountant assess VAT ownership and the actual agreement before including recovery in your budget.
Will returning unsold stock get my duty back?
Budget without a refund until your broker confirms an applicable route. Keep the original entry, return authorisation, batch records, export evidence and supplier receipt together.