HMRC starts the brief that HMRC is aware of incorrect treatment by businesses whereby import VAT has been incorrectly deducted as input VAT by non-owners of the goods.
For example toll operators import goods, but they do not take ownership of the goods and do not resell these goods. They may however, distribute the goods onwards at the instruction of the owner (their customer). The only supply by the toll operator is in fact a service to its customer, the owner of the imported goods. Title to the goods remains with the owners, which are foreign based customers.
However, the toll operator act as importer of record, pay the import VAT and receive the C79 (the import VAT certificate required for the deduction of the import VAT). The toll operator can however NOT reclaim the import VAT as it is not the owner of the goods. The correct procedure is for the owner to be the importer of record and reclaim the import VAT.
Another described scenario is where businesses sell on the goods just before importing them into the UK so ownership and title has passed to the new owner, however the business that sold the goods acts as ‘importer of record’ on UK import declarations, pays the import VAT to HMRC and receives the C79. The correct procedure is for the new owner of the goods to be the importer of record and reclaim the import VAT on the C79 and not the previous owner.
July 15, 2019
From July 15, 2019, HMRC will only allow claims for import VAT deduction made using the correct procedures. This allows an appropriate transitional period for businesses to make any necessary changes to ensure the correct procedures are used going forward.
With respect to the past incorrect claims, HMRC indicates that if the correct procedures had been followed there would normally be full recovery of VAT by the owners (through different procedures). HMRC accepts that as previous guidance was not clear, businesses in these situations have been acting in good faith.
HMRC will not pursue historical VAT deduction where the VAT could have been recovered in full by the owner of the goods at the time of importation as long as there is no risk of duplicated claims. In this context ‘historical’ means deductions made before July 15, 2019. This will apply to any affected businesses that meet all the qualifying criteria, such as:
- VAT deductions were made in genuine error, through misinterpretation of the legislation or guidance;
- the owner of the goods would have been entitled to full import.
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