We have a subsidiary company in India, who manufacture and ship to us. All transport is arranged by India, and we pay the VAT and deferment to the shipping agent on arrival to the UK, and then the goods are released for delivery.
I claim the VAT back when we receive the certificate from HMRC.
NOW - our customer (UK based) is in a rush for a part made in India. They are going to pay to Air freight the goods. To be delivered to us (as we need to do additional work to them before they are ready for the customer)
My question is - Who is going to be responsible for paying the VAT? Will the customer pay the air freight, and then we still pay the VAT to release the delivery?
I think that is the correct - as we are the destination.......
I sometimes manage to confuse myself!!!
Thanks all
Em
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Em
MAAT, CIMA student, avoider of Tax as much as possible and going greyer by the day.
Hi Em
Depends on your agreement with your client. Sounds like they are just saying they are happy to re-imburse you for the air freight (IE pay more), to get the final goods quicker. You need to have the conversation with whoever spoke to the customer. I would imagine it also depends on who India put as the end customer on all the air freight documents - sounds like it might be you, so you would pay the VAT to release.
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
This happens a lot in our business and I would suggest the VAT will still be paid by your company as that is just far simpler and avoids the customer seeing import entry documents that will tell them your cost prices!
The way we do this is to use our freight forwarders and simply charge the customer the extra cost of the airfreight and additional duty (as duty is charged on the airfreight cost too).
Your VAT bill will also be higher as VAT charged on freight cost too, but you will just reclaim that later anyway.
Do not miss the fact that if the items attract duty then you will pay duty of the airfreight element of cost too, so if duty is 10% and airfreight is 1,000 you will pay extra 100 in duty!
Sometimes you just need to write it down and this is why this site is so great.
I know what you mean about head spinning and rational thinking, happens a lot when there is too much work and there is no time to take a break. That's me..... despite knowing that taking that break helps clear the head and makes us more productive.....I say it all the time, but I never practice what I preach!
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
