Hi My new client imports his products from China. We recently received invoice from supplier for VAT Duty Charges? How shall I post it? Which account shall I allocated this charges to? Can we reclaim it as VAT input? Many thanks A
It's been a while since I did import duty but I do remember it can be a minefield and you need all the paperwork kept in order; we had regular visits from Customs. Best thing to do is get proper advice from HMRC, use their helpline and look at the publications online - if you get it wrong, there could be severe penalties. HMRC are there to HELP as well as collect taxes, remember, they want you to get it right too so their workload is greatly reduced.
In your client's books, split the VAT element from the duty element. Your client's organisation cannot recover duty charges but can recover input vat, following the same rules as if their supplier was in UK.
Your client will receive a certificate (called C79) from HMRC, showing VAT paid on imported goods. Keep hold of this certificate as back up to their VAT return.
I used to work for someone who imported some goods from the USA. The invoices from customs were split into Import Duty, Customs Duty, charges etc and VAT. I posted the Import Duty and Customs Duty in the purchases/cost of sales range (5000/6000 in Sage) and the VAT to the Purchase tax control account. As Dalbir says, you will get a certificate from HMRC which is proof that you are entitled to recover the VAT suffered.
Unless the rules have changed, you can't actually claim the vat back on imports until you have received the C79.
If your client imports a lot from the Far East, I'd recommend you open a Control account in the balance sheet. When you receive vat / duty invoice from the freight forwarders / agents I would
Dr C79 Control
Cr Trade Creditors
Then when you physically receive the C79
Dr Vat recoverable
Cr C79 Control.
This may seem unnecessary but I've had experience of Agents not forwarding Vat onto HMRC so the appropriate C79's where never issued. HMRC may then attempt to make your client pay twice!!
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Tony
Responses are intended as outline only. Formal advice should be sort from your Institutes Technical Department or a suitably qualified Accountant.
Yes you need the C79 in order to reclaim the VAT - most forwarders send this within a month or so of the transaction but I have a feeling if the forwarder is Parcelforce they don't supply one and, as it's a while since I had one of these I can't remember what you do but they do tell you on the invoice they send.
I have a clients whose shipper pays the duty and VAT and supplies a VAT invoice. The C79 then belongs to the shipper, and as my client has a VAT invoice from them - he does not need the C79.
It's interesting the way peoples experience differs.
In my experience in order to clear goods through customs you need the original docs - cert of origin, bill of lading, invoice etc. If that's the case it implies your clients agent is clearing the goods against their own vat number and not the clients, which is different to what's on the original documentation.
I didn't know you could do that?
-- Edited by ADAS on Thursday 21st of July 2011 05:08:56 PM
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Tony
Responses are intended as outline only. Formal advice should be sort from your Institutes Technical Department or a suitably qualified Accountant.
You can also enter into a scheme (dependent on approval from HMRC) that defers duty and import vat, so you can sell the goods before paying duty and import vat.
Thanks, interesting reading up on this because it's new to me.
If I understand it right, the Agent must have set up an approved deferment scheme, as per Dalbir, and uses that number rather than a vat registration to clear the goods.
__________________
Tony
Responses are intended as outline only. Formal advice should be sort from your Institutes Technical Department or a suitably qualified Accountant.
