Are you hoping to sell your products in the U.K. for the first time? If so, RangeMe’s platform provides a simple way to connect with U.K. retailers looking for the type of goods you offer. But you will need to get your head around the U.K.’s customs regulations, including the rules on value-added tax (VAT).
The first thing to establish is whether your customer will act as the importer of record when buying your products or whether you are expected to take on this role. If the former, the retailer is responsible for managing most of the paperwork required for customs and tax purposes – and paying any taxes due. In practice, however, U.K. retailers often expect suppliers to act as importers to reduce the administrative burden when buying from many different international producers.
Assuming that is the case, you will have a number of different responsibilities when importing goods into the U.K. Get started by registering with the authorities. You will need an “EORI” number to import goods into the U.K. – apply for one here – and a registration for VAT, the tax that is payable on sales of most goods and services in the U.K. (apply here). The process typically takes three to six weeks for non-U.K. companies, and once you have those registrations, it also makes sense to sign up for HM Revenue & Customs’ Customs Declaration Service (see here) which makes handling VAT much easier.
How is VAT calculated?
Importers that bring goods into the U.K. are responsible for paying the import VAT due on these products. This is charged at the U.K.’s usual VAT rates, of which there are three: the standard rate of 20%, payable on most goods; the reduced rate of 5%, payable on a handful of goods such as home energy; and the zero rate, which is payable on most food and drink – but not alcoholic drinks, confectionery, and other snacks (which are standard-rated).
Importantly, import VAT is calculated on the total cost of the goods you import, including the value of the product, the shipping costs for bringing it into the country, and any customs duties due. Make sure you calculate your VAT liability at the correct rate on the full amount.
To do this, you will need to check which rates of duty, if any, have to be paid on the imports of your goods (you will also need to pay these duties before the goods clear customs). You can check the commodity code for your product here, which then determines what tariff is payable. This will be due unless you are based in a country that has a preferential trade agreement with the U.K., with mutual reductions on tariffs.
Keeping track of VAT costs
The good news is that you get to recover your VAT costs because you include them in the price you charge to the retailer buying your goods. But with the tax due upfront before your goods clear customs, importers do sometimes face cash flow problems. This is where the Customs Declaration Service can be useful. If you are signed up, you make quarterly VAT returns, declaring VAT you owe, and VAT you have received from customers, rather than having to settle the bill upfront.
Good paperwork is the key to managing all these responsibilities well. When you bring goods into the U.K., they will need to be accompanied by a number of different documents. These include a commercial invoice, a certificate of origin showing where the goods are coming from, a bill of lading, and a packing listing. You may also need additional documentation such as health and sanitary certificates for certain foodstuffs and safety certifications for electrical items. The U.K. Government’s website carries full details of what might be needed for different products.
Helpful resources on VAT
If all of this sounds daunting, plenty of help is available. In particular, the shipping or customs agent you use to move your goods into the U.K. will very often be able to guide you through each step of the customs process, and explain what documentation you need. These agents may even be able to act on your behalf in the U.K. HMRC publishes a register of customs agents in the U.K. here.
Other potential sources of help include the U.K. Government’s websites, which provide all the details importers of different types of goods will need. It is also likely that your own government publishes advice for companies selling into the U.K. trade associations and other industry bodies may also be helpful – and your end-customer, the U.K. retailer, may offer advice too.
The important thing is not to be put off by the administrative work involved in selling your products into the U.K. While there is some paperwork to get through, particularly when you begin selling, the size of the opportunity more than compensates for putting in the effort. The U.K. spends nearly £50bn a year on imports of food and drink alone – and consumption of products from overseas has risen almost 50% over the past decade.