Import duties, VAT and payment options

When you import goods into the UK, you may face several types of charges: customs duty, import VAT, excise duty, and occasionally anti-dumping or countervailing duties. Since Brexit, this applies to imports from the EU as well as the rest of the world. Understanding how these charges are calculated and your payment options can significantly improve your cash flow.

Types of import charges

There are four main charges that may apply when you import goods:

• Customs duty: A percentage of the customs value of your goods, determined by the commodity code and the UK Global Tariff rate. Rates vary from 0% to over 20% depending on the product.
• Import VAT: Charged at the standard rate of 20% (or the reduced rate of 5%, or zero-rated) on the customs value plus any customs duty and excise duty. Most VAT-registered businesses can reclaim import VAT.
• Excise duty: An additional charge on specific goods including alcohol, tobacco, and hydrocarbon oils (fuel). The duty point for excise goods normally arises when goods leave an excise warehouse or are imported outside of warehousing arrangements.
• Anti-dumping and countervailing duties: Additional duties applied to specific products from specific countries where the UK government has determined that goods are being sold below fair market value or benefit from unfair subsidies. Check the UK Trade Tariff tool for any additional duties on your goods.

Customs value: how duty is calculated

Customs duty is a percentage of the customs value of your goods. The primary method for determining customs value is the transaction value method (Method 1), which is the price actually paid or payable for the goods when sold for export to the UK.

The transaction value must include certain additions:

• Transport and insurance costs to the UK border (CIF - Cost, Insurance and Freight)
• Commissions and brokerage fees (except buying commissions)
• Royalties and licence fees related to the goods that the buyer must pay as a condition of sale
• The value of any goods or services supplied by the buyer to the producer (assists)
• Proceeds of any subsequent resale that accrue to the seller

If the transaction value cannot be used (for example, because there is no sale, or the buyer and seller are related and the relationship influenced the price), HMRC requires you to use alternative valuation methods in a strict order: transaction value of identical goods (Method 2), similar goods (Method 3), the deductive method (Method 4), the computed method (Method 5), or the fall-back method (Method 6).

Commodity codes and the UK Global Tariff

The duty rate applied to your goods is determined by their 10-digit commodity code under the UK Global Tariff (UKGT). Use HMRC's Trade Tariff tool to look up the correct code. The tool shows the duty rate, any applicable trade preferences, and whether additional duties or trade remedies apply. Always use the UK tool rather than assuming EU tariff rates still apply.

Preferential rates and trade agreements

The UK has free trade agreements (FTAs) with over 70 countries and trading blocs. If you import goods from one of these countries, you may be eligible for a reduced rate of customs duty, known as a tariff preference. Some agreements reduce rates to 0%.

To claim a preferential rate, you must:

• Meet the rules of origin: Goods must originate in the partner country according to the specific rules in each FTA. This means they must be wholly obtained there (e.g. agricultural products) or sufficiently processed (e.g. manufactured goods that undergo substantial transformation).
• Obtain proof of origin: Depending on the agreement, this may be an EUR.1 movement certificate issued by the exporting country's customs authority, an invoice declaration (a statement of origin on the commercial invoice by an approved exporter), or a self-certification by a Registered Exporter (REX) under the REX system.
• Claim the preference on your customs declaration: You must enter the correct preference code and document reference on the CDS import declaration.

Generalised Scheme of Preferences (GSP)

The UK's Developing Countries Trading Scheme (DCTS) provides unilateral tariff reductions for imports from eligible developing countries. This replaced the old EU GSP scheme. Goods must meet specific origin rules and be accompanied by a valid proof of origin.

Import VAT: calculation and recovery

Import VAT is calculated on the aggregate value: customs value + customs duty + excise duty (if applicable). The standard rate is 20%, though some goods are zero-rated (e.g. most food, children's clothing, books) or charged at the reduced rate of 5%.

If you are VAT-registered and use the goods for business purposes, you can recover import VAT. There are two ways to evidence your claim:

• C79 certificate: If you pay import VAT at the border or through a duty deferment account, HMRC issues a monthly C79 certificate showing the VAT paid. You use this as evidence to reclaim on your VAT return.
• Postponed import VAT statement: If you use Postponed VAT Accounting (PVA), you access monthly statements through your CDS dashboard. These show the import VAT you have declared on your VAT return.

Postponed VAT Accounting: the cash flow advantage

PVA is the single most important cash flow tool for regular importers. Instead of paying import VAT at the border (and then waiting to reclaim it on your next VAT return), you declare the import VAT and recover it on the same VAT return. This eliminates the cash flow gap entirely.

To use PVA you must be VAT-registered in the UK. You declare the import VAT in Box 1 of your VAT return and reclaim it (subject to normal input tax rules) in Box 4. You access your monthly postponed import VAT statements through the CDS dashboard and must keep these for your records.

PVA is available for all imports into Great Britain. You do not need to apply for it separately; you select it as your payment method on the customs declaration.

Duty deferment accounts

A duty deferment account (DDA) lets you delay paying customs duty, import VAT, and excise duty until the 15th of the month following import, consolidating all charges into one monthly Direct Debit. This gives you between 2 and 6 weeks of credit, with an average of 30 days.

Guarantee requirements

To open a DDA, you normally need a financial guarantee (a bank or insurance guarantee) covering your estimated monthly duty liability. The guarantee should cover your typical monthly duty bill plus a buffer. Review it every 6 months as your import volumes change.

You may be able to reduce or waive the guarantee requirement if you hold Authorised Economic Operator for Customs Simplifications (AEOC) status or meet certain financial criteria. A Customs Comprehensive Guarantee (CCG) can cover customs duty, excise duty, and import VAT across multiple procedures including deferment, transit, and special procedures.

Combining deferment with Postponed VAT Accounting

For the best cash flow outcome, use duty deferment for customs duty and PVA for import VAT. This means customs duty is paid monthly via deferment (15th of the following month) and import VAT is declared on your VAT return with no upfront payment at all.

Excise duty on imports

Excise duty is charged in addition to customs duty and import VAT on three categories of goods:

• Alcohol: Beer, wine, spirits, cider, and other alcoholic products. Rates vary by product type and alcohol by volume (ABV).
• Tobacco: Cigarettes, cigars, hand-rolling tobacco, and other tobacco products. Charged as a combination of specific duty (per quantity) and ad valorem duty (percentage of price).
• Hydrocarbon oils: Petrol, diesel, biodiesel, and other fuels. Rates are set per litre.

For excise goods, the duty point normally arises when goods are released for consumption. If you import excise goods regularly, you may benefit from using an excise warehouse, where goods can be stored with duty suspended until they are released for sale.

Customs duty reliefs

Several relief schemes can reduce or eliminate the customs duty you pay:

• Inward Processing Relief: Suspend customs duty and import VAT on goods imported for processing (manufacturing, repair, or renovation) before re-export. Requires HMRC authorisation.
• Outward Processing Relief: Pay reduced duty on goods that were exported from the UK for processing and then re-imported. Duty is charged only on the value added abroad.
• End-Use Relief: Reduced or zero duty rate on goods imported for a specific approved end use (e.g. aircraft parts for civil aviation).
• Temporary Admission: Full or partial duty relief on goods imported temporarily (e.g. exhibition goods, professional equipment, samples) that will be re-exported.
• Returned Goods Relief: Relief from customs duty on UK-origin goods that were exported and are being returned within 3 years in the same condition.
• Customs Warehousing: Store imported goods in an approved customs warehouse with duty suspended until they are released for free circulation or re-exported.