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HMRC internal manual

Imports

From
HM Revenue & Customs
Updated
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Import entry procedures: Input or Output tax position on goods rejected by the importer

When, after clearance out of charge, goods are rejected by a registered taxable person who imported them for the purpose of a business, that person’s entitlement to deduction of input tax is unaffected by the subsequent rejection.

Where rejected goods are re-despatched to another registered trader in the UK on the instructions or with the agreement of the overseas supplier, no output tax is chargeable by the importer. Similarly no output tax is chargeable by the overseas supplier unless such transactions appear to represent a continuing business activity in the UK. Importers who reject goods are to be encouraged to retain evidence of their subsequent disposal to satisfy VAT officers that they are not accountable for output tax.

Registered traders obtaining goods rejected by importers are not able to deduct the import VAT as input tax. This entitlement rests solely with the importer and cannot be transferred. However, such traders will be required to account for output tax on subsequent supplies of the goods.

Importers and traders obtaining rejected goods who enquire about their VAT position in the above circumstances are to be advised of the general tax rules using the specimen form letter below at . A copy of the letter is to be sent to the LVO for the trader obtaining the rejected goods for reference and action as appropriate.

When the rejected goods are re-despatched to an unregistered trader and the value of the goods is at or above the VAT registration threshold the facts of the case should be notified to the LVO covering the area where the trader is located.

Shipping agents and others who enquire about the recovery of import VAT in the circumstances mentioned above are to have their attention drawn to Notice 702, paragraphs 2.4 and 2.5 and are to be informed that the tax may be reclaimed on a VAT return only by the original importer. Where an agent has paid the tax on behalf of the importer, the amount may not be recovered from Revenue and Customs by the agent but should be charged to the importer as a disbursement. The recovery by agents of amounts disbursed as VAT on behalf of importers is a commercial matter between the parties involved and does not affect the Department, but see IMPS03360 for the extra-statutory concession that applies in certain circumstances where an importer has become insolvent. Where the import VAT cannot be recovered through the normal deduction system and direct payment of VAT is sought see IMPS05400.

Specimen main text for letter to traders about goods

Goods rejected by importer

I understand that you have enquired about the VAT position in respect of imported goods (Details above) that have been rejected after Customs clearance. The VAT position is set out below.

For importers:

  • rejection of the goods does not affect your entitlement to deduct the import VAT as input tax subject to the normal rules
  • you are not required to account for output tax where the goods are:

    • returned to the overseas supplier, or
    • re-despatched to another UK registered trader on the instructions or with the agreement of the overseas supplier
  • it is suggested you retain evidence of the disposal of the goods in order to satisfy our officers that you are not accountable for output tax.

For registered traders obtaining goods rejected by importers:

  • you have no entitlement to deduct the import VAT as input tax. This entitlement rests solely with the importer
  • unless the overseas supplier is UK VAT registered and charges output tax on the supply you are not entitled to deduct input tax on all or any part of the value of the goods
  • you are required to account for output tax at the appropriate rate on the onward supply of the goods to your customers.