Businesses who regularly import goods into the UK will be aware of the customs procedure that allows the “importer of record” of the goods to recover the import VAT charged once they have received the corresponding C79 “Import VAT Statement” from HM Revenue & Customs (“HMRC”).
HMRC recently published Brief 2/19 “Import VAT deducted as input tax by non-business owners” which concerns businesses who recover input tax after they have imported the goods despite being “non-owners” of those goods, is incorrect.
In the Brief, HMRC uses the example of toll operators who act on behalf of foreign clients and do not actually own the goods that are being imported.
For clarification, the way in which a Toll operator in the UK operates is by importing the goods (commonly within the pharmaceutical sector), processes them and then distributes the goods within the UK for clinical trials. At no point do the Toll operators take ownership of the goods. Title of the goods remains with the overseas supplier.
The role of the toll operators here is merely to act as the importer of record to release the goods into the UK economy and distribute them throughout the UK. They do not at any point take ownership of those goods. Despite this toll operators will receive the corresponding C79 for those goods, however, they will not in fact be entitled to recover the input tax incurred as they “non-owners” of those goods.
The correct procedure for the owner to be the importer of record and reclaim the import VAT, is either:
- If registered for VAT in the UK – recover on a UK VAT return;
- If not registered for VAT in the UK – under the Thirteenth VAT Directive (86/560/EEC) (if not registered for VAT in the UK). The time limit for making Thirteenth Directive claims is within 6 months of the ‘prescribed year’ in which the VAT was charged
HMRC have stated that there will be no retrospective action taken against the toll operators who acted in good faith with regards to the recovery of input VAT, but HMRC will be taking a more vigilant approach from 15 July 2019.
This highlights to businesses who are importing goods regularly into the UK that they need to have clarity over who is the registered owner of the goods in order to be able to fully recover the input VAT on the C79. Whilst HMRC is not prohibiting the overseas customer from reclaiming the input VAT as the owners of the goods, but with HMRC tightening their grip on the procedures in place, this might become more of a technical headache and involve additional procedures.
Author: Andy Young, CT: VAT
