Importing goods for repair and return under warranty? Understand the post-Brexit VAT rules, ownership implications, and how to reclaim import VAT to avoid unexpected costs.

Since we left the EU, the rules have changed, and sending/receiving goods is more challenging. This can be especially difficult for companies offering warranty on goods sold into overseas markets.

When a UK company offers a repair service under warranty, then consideration needs to be assessed as to how the VAT is accounted for on the import of these goods. The UK company will be the Importer of Record (IoR), but the goods are owned by the overseas customer returning the goods. The IoR will most probably be accounting for the VAT element by using their Postponed VAT account and then reclaiming this back through their VAT returns or by obtaining an Import VAT Certificate (C79) and again reclaiming through their VAT returns. In most cases, there is no duty applicable, but if there is, HMRC will need to be paid this amount separately.

The ownership issue is a concern for the IoR as HMRC rules that an importer will not be allowed to recover VAT paid at import unless they own the goods concerned, which also extends to goods on loan. If the import VAT cannot be claimed, this is an additional cost to the importer.

There are ways you can mitigate this complication.

• You should evaluate your ability to reclaim import VAT before importing goods.
• Determine if you are the owner of the goods.
• Apply to use Inward Processing, Customs Warehousing or Temporary Admission.

Case law has been applied, and a recent decision by a UK tribunal has highlighted the issue of ‘ownership of goods’ and the eligibility to reclaim import VAT. The appellant, Piramal Healthcare UK Ltd, was required to repay £196,254 on the importation of goods. https://caselaw.nationalarchives.gov.uk/ukftt/tc/2023/891?query=PIRAMAL+HEALTHCARE+UK+LIMITED

HMRC Internal Manual – VIT13300 – VAT Input Tax basics: recipient of supply https://www.gov.uk/hmrc-internal-manuals/vat-input-tax/vit13300

The Chamber provides training sessions on utilising Inward Processing, along with help in navigating the complexities of importing and exporting. We provide expert advice, practical support, and tailored guidance to help your business succeed in international trade.