Amazon sellers importing stock: the owner reclaims the VAT

A VAT-registered seller who imports stock can normally reclaim the import VAT, often on the same return. HMRC's rule is that only the owner of the goods can do that, not whoever happened to pay the VAT at the border. When a supplier ships "duty paid" and the paperwork names someone else, a seller can end up with VAT built into the price and nothing to reclaim it with.

The owner, not whoever paid

HMRC's VAT Input Tax manual is direct about it: "Import VAT may only be claimed by the owner of the goods." It adds that the owner's EORI number, the customs identification number every importer needs, should be shown on the import declaration. Ownership here means the right to deal with the goods as your own. Title can pass later, on payment, and you can still be the owner for this purpose.

HMRC's guide to paying VAT on imports makes the same point from the other side: a shipping or forwarding agent "cannot usually reclaim this input tax", because the goods were not imported for their own business.

How it works when it works

The simplest route is postponed VAT accounting. Instead of paying import VAT at the border, you declare it and reclaim it on the same VAT return, so no cash leaves the business. You can use it if both of these apply:

• the goods are for your business and you have the right to dispose of them, "usually as the owner";

• your VAT registration number is on the import declaration.

If a freight forwarder or customs agent imports for you, you must tell them in writing that you want postponed accounting. If your supplier arranges the import, HMRC says you must agree with the supplier how the import VAT will be handled, give them your EORI number, and keep a record of what you agreed. Either way, the import then appears on your monthly postponed import VAT statement. One exception worth knowing: parcels over £135 that come through Royal Mail or Parcelforce's postal service cannot use it.

Where duty-paid deals go wrong

On a "delivered duty paid" deal, the supplier quotes one price that includes getting the goods into the UK, VAT and duty included. If ownership has already passed to you before the goods arrive, HMRC says it is you, as owner, who recovers the VAT, even if the supplier stays the importer of record and pays the VAT at the border. But you need your EORI on that declaration, and the import on your statement or import VAT certificate, to prove it.

If the supplier still owns the goods when they land, it is the supplier's import. It then sells to you in the UK, and an overseas business supplying goods in the UK has to register for UK VAT whatever its turnover. Your only route to the VAT is a UK VAT invoice from that supplier. No invoice, no reclaim.

Illustration, not a real client. Tariq sells desk organisers on Amazon from Southall and is registered for VAT. He orders spring stock from a factory overseas on duty-paid terms. The import VAT on the shipment is £4,000.

• If his contract makes the goods his before they arrive, his EORI and VAT number are on the declaration and postponed accounting is selected, the £4,000 appears on his monthly statement. He declares it and reclaims it on the same return. As long as the factory has taken the import VAT out of its duty-paid price, it costs him nothing.

• If the declaration is in the supplier's name and the supplier gives him no UK VAT invoice, the £4,000 is still inside the price he paid. He has no evidence to reclaim it, and it comes straight off his margin.

Before the next shipment

I would not sign a duty-paid deal without asking two questions first: when do the goods become mine, and whose name goes on the import declaration? Then:

• agree in writing when the goods become yours and, if that is before they arrive, that your EORI and VAT number go on the declaration with postponed accounting, and that the price no longer includes the import VAT;

• check every import against your monthly postponed import VAT statement;

• if the supplier insists on importing in its own name, ask for its UK VAT number and a VAT invoice before you pay.

Stock flows through Amazon, your own site and the bank at different speeds, and how we keep the books for online sellers explains how the import charges fit into them. Ask the question on the next order, before the goods are on the water.

About the author

Harvey Dhillon is Founder and CEO of Zmartly, an accountancy firm for ecommerce sellers. He grew up in West London and began his career in finance at Barclays, in investment banking and wealth management, before going full-time on Zmartly in 2020.

Featured photo by thorl5 on Pexels.