Guidance

Import VAT relief for goods supplied onward to another country in the EC (VAT Notice 702/7)

How to claim Onward Supply Relief (OSR) if you import goods from outside the EU for onward supply to a country in the EU.

Detail

This notice cancels and replaces Notice 702/7 (December 2013).

Regulation 123 of the VAT Regulations 1995 gives the Commissioners power to impose conditions on the relief. Those conditions have the force of law. Where those conditions appear in this notice, they’re marked ‘This section has force of law’.

1. Overview

1.1 Information in this notice

This notice explains how VAT-registered persons who import goods from outside the EU may claim ‘Onward Supply Relief’ or ‘OSR’ from the import VAT that would otherwise be chargeable.

1.2 What’s changed

This notice has been updated at paragraph 2.3 with new contact details for the National Import Reliefs Unit (NIRU).

1.3 Who should read this notice

This notice is of interest to anyone who is or will be importing goods from outside the EU (whether on their own behalf or on behalf of another person) in the course of a supply to a person in another EU country (or ‘member state’).

1.4 The law

The relevant law is set out in:

  • Article 143 of Directive 2006/112/EC (the Principal VAT Directive)
  • Section 47 of the VAT Act 1994
  • Regulation 123 of the VAT Regulations 1995
  • Regulation 134 of the VAT Regulations 1995

2. Onward Supply Relief (OSR)

2.1 Who’s eligible to use OSR

A UK VAT-registered person who imports goods then:

(a) makes an onward supply of those goods that’s zero-rated in accordance with Regulation 134 of the VAT Regulations 1995 (supplies to persons taxable in another member state), or

(b) acts as agent for a non taxable person in relation to an onward supply of those goods that’s zero-rated in accordance with Regulation 134 of the VAT Regulations 1995 provided that the agent ‘acts in his own name’ in relation to that supply.

The zero rating of supplies to persons taxable in another member state is dealt with in VAT and the single market (Notice 725).

2.2 Use OSR if you’re an agent

You can use OSR, provided that:

(a) you’re the importer of the goods (which you will be if you’ve submitted the import declaration in your own name), and

(b) you act in your own name in relation to the onward supply

An agent acts in their own name in the onward supply if they act as though they were the vendor. We would not consider an agent to be acting in their own name if any of the following apply:

  • the contract for sale is between their principal and the purchaser
  • if the invoice for the purchase price is issued in the principal’s name
  • if the agent represents to the buyer that they’re acting in the sale on behalf of a named principal

Section 47 of the VAT Act 1994 applies in particular.

Note: an agent not fulfilling the conditions and acting purely as the freight forwarder would not meet the conditions of OSR, retrospective amendment of the customs declaration at that point would not be possible. Such traders should have used an alternative system such as (but not restricted to) external community transit.

Prior to the use of any customs procedures you must make sure that you meet all the conditions for actually submitting the customs declaration as well as conditions applying subsequently.

2.3 The conditions of OSR

This section has force of law

You must enter in box 44 of the import Single Administrative Document (SAD):

  • your VAT identification number (beginning Y040GB if you’re importing the goods on your own behalf and Y042GB if you’re importing them as an agent for someone else)
  • if known, the expected place and date of onward consignment
  • if known, the particulars of the onward transport
  • the name, address and VAT identification number (including the Y041 prefix followed by the 2 digit country code) of the purchaser in the member state of destination

You must also:

(a) dispatch the goods in the same state as they were when imported (without processing them in any way)

(b) remove the goods to another member state within one month of the date of importation (which is the date on which they’re released to free circulation), if you cannot meet this deadline, you can apply to the NIRU for an extension

National Import Reliefs Unit
Dorchester House
52-58 Great Victoria Street
Belfast
Northern Ireland
BT2 7WF

Telephone: 03000 513310
Email: niru@hmrc.gsi.gov.uk

(c) complete EU sales lists and record EU trade figures in your VAT Returns

(d) comply with all the obligations of a person making a zero-rated supply (see VAT and the single market (Notice 725))

2.4 Other details required on a SAD

Enter the appropriate Customs Procedure Code (CPC) in box 37.

By using the CPC you’re making a declaration that you:

  • have met the conditions of the relief at paragraphs 2.1 to 2.3
  • will produce, if asked by one of our officers, commercial evidence that the goods have been supplied onward to another EU country
  • will pay on demand any import charges due if the conditions of the relief are not met

Although the law allows us to, we do not normally require you to provide security for VAT.

The CPC applicable to your particular OSR importation (and the conditions that apply) can be found by referencing the Integrated Tariff of the United Kingdom, Volume 3, Appendix E2.

Note: when goods are imported make sure the correct import CPC is used. Failure to do so may result in OSR being refused.

2.5 What happens if you do not comply with the conditions of OSR

If you do not comply with the OSR conditions we will normally issue a C18 demand for the import VAT.

If you have to pay the import VAT, you may be able to reclaim it as input tax on your VAT Return. But import VAT can only be recovered as input tax where the goods, on which the import VAT has been charged, are used in the making of taxable supplies. In practice this requires that the business makes the onward supply as principal or undisclosed agent. (See paragraph 2.1 and paragraph 2.2.)

For further details refer to Imports and VAT (Notice 702).

3. Appeal against a decision

If you do not agree with the decision issued to you, there are 2 options available:

  • if you want a review you should write back to the decision maker within 30 days of the date of letter, giving your reasons why you do not agree with their decision
  • appeal direct to the tribunal who are independent of HMRC

If you opt to have your case reviewed you will still be able to appeal to the tribunal if you disagree with the outcome.

Further information relating to reviews and appeals is contained in leaflet HMRC1.

This change of policy came into effect on 1 April 2018.

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Published 5 December 2013