How much VAT do you pay on imports from China?

Import VAT is a cash flow question, not usually a cost

If you are VAT registered and the goods are for your business, import VAT is normally recoverable. That makes it fundamentally different from duty, which is normally a permanent cost unless a specific relief or repayment provision applies.

So the questions that matter about import VAT are when you pay it, when you get it back, and what evidence you need to make the claim. Businesses that treat it as a cost price their products wrongly, and businesses that ignore the timing find a substantial sum leaving the bank weeks before it returns.

This guide covers VAT specifically. For duty rates, commodity codes and how the two are calculated together, see our guide to UK import duty and VAT, and for the DDP problem in full, see the guide to the DDP import VAT trap. For classification uncertainty, see our guide to Advance Tariff Rulings.

For a planned goods order, see how our sourcing service can structure a quote around the agreed importer and delivery point. Check the VAT treatment with your customs or tax adviser before approving the transaction.

What import VAT is charged on

Not the invoice value. Import VAT is charged on the customs value, plus any taxes, duties and charges payable because of the importation other than VAT itself, plus incidental costs such as transport and insurance to the first destination in the UK. If a further UK destination is already known when the goods are imported, the cost of getting them there counts too.

That has two consequences people miss. First, VAT is charged on top of duty rather than alongside it, so a high duty rate increases the VAT as well, and the same is true of anti-dumping duty and excise where they apply. Second, the customs value is itself larger than the invoice, because it includes freight and insurance to the UK border and things you supplied to the factory such as tooling.

So a calculation based on the invoice alone will understate what leaves your bank. Build the customs value properly first, then apply duty, then apply VAT to the total.

Postponed VAT accounting, which most importers should be using

Postponed VAT accounting lets a VAT registered business declare and recover import VAT on the same VAT return, instead of paying it at the border and reclaiming it later.

It needs no approval and no application. You are eligible if you are VAT registered in the UK, the goods are for use in your business, and you have the right to dispose of them, normally as the owner. What you must do is include your VAT registration number on the import declaration and tell whoever makes the entry that you are using it, because they will not assume it.

It does not reduce the tax. It removes the gap during which a substantial sum sits with HMRC rather than in your business, and on a container that is often the single largest cash flow improvement available to a small importer. It is free to arrange and routinely left unused.

Evidence, and why it decides whether you can reclaim

To recover import VAT you need the right evidence in your own name. If you use postponed VAT accounting, you account for it on your return using the monthly statement available to you. If import VAT is paid at the border, the import VAT certificate is the document that supports the claim.

The right to recover follows ownership of the goods, and the evidence follows the declaration, so both have to line up. An import where somebody else is shown as the importer, or where the certificate is in another party's name, is where reclaim problems begin.

So check what is actually being declared and in whose name, rather than assuming. This is a five-minute check that prevents a twenty per cent problem.

The DDP arrangement that can cost you the whole amount

This is the trap worth understanding before you accept a delivered price from a Chinese supplier. Under DDP the seller normally arranges the import and pays the duty and import VAT, often through their own agent.

Because entitlement to recover import VAT follows ownership, and under DDP the seller frequently still owns the goods at the point of import, the party who paid the VAT may not be the party entitled to reclaim it, and you may have no valid certificate in your own name to support a claim. A forwarder or agent cannot simply reclaim it either.

The practical result is a business paying twenty per cent it did not budget for and cannot recover, on a shipment that looked cheaper than the alternatives. Before accepting DDP, ask whose EORI number will be used, who will be shown as importer, and whether you will receive an import VAT certificate in your own name. If the answers are vague, the usual fix is not to abandon a delivered term altogether but to buy on DAP instead: the supplier still delivers to you, and you are the importer of record with the entry, the evidence and the recovery right in your own name.

Practical points that come up

Currency: the conversion used on the declaration normally uses HMRC's published customs exchange rate applicable when the declaration is accepted, unless an applicable contractual fixed rate is used. It is not simply your bank's rate on the day or the rate you actually paid, so the VAT figure can differ from the one you modelled.

Low value consignments and goods sold through online marketplaces have their own rules, so if you sell that way, check how VAT is accounted for before assuming the import position applies. For courier parcels, see our bulk clearance and VAT guide. For Northern Ireland parcels, see our guide to whose UKIMS authorisation to use.

Records: keep the documents supporting your customs value for at least four years, and generally keep your VAT records, including the evidence for every reclaim you make, for at least six years. A reclaim you cannot evidence is a reclaim you may have to repay.

Jersey and Guernsey are outside the UK VAT area, so goods cleared there do not pay UK import VAT; the Isle of Man is treated as part of the UK for VAT. See importing from China to Jersey and the Channel Islands.

To work out the import VAT on a shipment, use our import VAT calculator.

If your business is not VAT-registered, import VAT works differently; see Importing when you are not VAT registered.