Customs Duty and import VAT

When goods arrive in the UK from outside the UK, two charges can apply at the same time. One is Customs Duty, a tax on bringing goods into the country. The other is import VAT, the same kind of VAT charged on a sale within the UK, applied instead to goods crossing the border.

Parliament set out the rules for both charges in the same piece of legislation, the Taxation (Cross-border Trade) Act 2018. It treats import VAT in much the same way as Customs Duty, as something due on the goods themselves rather than on a sale between two parties.

That is why a business bringing in goods for the first time usually meets both charges together.

Once goods are on their way to the UK, Customs Duty is charged on their customs value. Getting that value right comes first, because every later calculation starts from it.

What the customs value means

The customs value is the figure HMRC uses to work out how much Customs Duty and import VAT are due on a consignment. GOV.UK sets out several methods for arriving at it, used in a set order, but most businesses buying goods for resale can use the first one.

Method 1: the price actually paid

Method 1 takes the price paid or payable for the goods when they were sold for export to the UK, and builds the customs value from that figure. It starts from the commercial invoice, which is why it covers the large majority of imports.

A business can only use Method 1 where the sale is a genuine one between buyer and seller, with no restrictions on how the goods are used or resold, and no arrangement that sends any part of a resale profit back to the seller. Where a consignment doesn't meet those conditions, the later methods apply instead.

What gets added to the invoice price

The invoice price is the starting point. Certain costs have to be added where they aren't already included in it:

• the cost of transporting the goods to the UK border
• insurance for that journey
• loading and handling charges connected with the transport
• royalties or licence fees the buyer has to pay as a condition of the sale

A business paying any of these separately from the goods still has to add them to the customs value, even where they don't appear on the supplier's invoice at all.

Where the terms of sale come in

The commercial terms agreed with the supplier decide which of these costs already sit inside the invoice price and which have to be added on top. A business buying on terms where the supplier arranges and pays for shipping is starting from a different invoice figure than one arranging and paying for transport itself, even for an identical consignment.

The rate that applies to the finished customs value depends on the commodity code the goods are classified under. Anyone working out what they owe needs that code before the calculation can be finished, which is what GOV.UK's Trade Tariff tool is for.

Customs Duty is not always charged at the same rate. Where the UK has a trade agreement with the country the goods come from, a lower rate can apply, and in some cases none at all.

What a trade agreement can do

A trade agreement is a deal between the UK and another country, or group of countries, that sets out reduced rates of Customs Duty for goods moving between them. The reduced rate is called a preferential rate, and it only applies to goods that meet the agreement's own conditions.

Where rules of origin come in

Those conditions are known as rules of origin. They look at where goods were actually made or produced. Goods bought from a supplier in one country can still fail to qualify if the materials or manufacturing behind them come from somewhere else, because each agreement sets its own test for what counts as originating there.

Checking each time

The rules of origin for one product under one agreement are not the rules for another product, or another agreement, and they can change over time. A lower rate claimed on an earlier shipment is not a guarantee that the next one qualifies. Before relying on a preferential rate, check the rate and the conditions that apply to the commodity code for those goods, which the Commodity Codes and the Trade Tariff guide explains how to find.

Once Customs Duty and import VAT have been worked out on a shipment, the money has to reach HMRC before the goods can move freely. GOV.UK sets out three ways of doing this, and the right one for a business usually comes down to how often it imports and how it wants to manage the cash involved.

Paying straight away

The simplest route is to pay the duty and import VAT owed on a consignment at the time it arrives, before the goods are released. The person making the declaration, whether that is the business itself or an agent acting for it, arranges payment as part of clearing the goods through customs.

Cash accounting

Cash accounting means paying money into an account held with HMRC in advance, then having the duty and import VAT on each consignment drawn from that balance as goods arrive. It suits a business that wants to settle charges from funds already set aside.

A duty deferment account

A duty deferment account lets a business delay payment on each consignment and settle the Customs Duty and import VAT owed across a period together. GOV.UK describes this as giving an average of 30 days' credit, which can make it easier to plan cash flow around regular imports.

For the rate that applies to a particular product, and for the detail behind how a declaration states what is owed, the Commodity Codes and the Trade Tariff guide and the Customs Declarations guide cover the steps either side of payment.

Import VAT is normally charged at the point goods arrive in the UK, in the same way Customs Duty is. Postponed VAT accounting lets a VAT-registered business declare that VAT on its regular VAT Return.

No approval is needed to use postponed VAT accounting. A business chooses it by stating so on the customs declaration for that shipment, and the choice can be made each time a declaration is made.

Using an agent to declare the goods

Many businesses use a customs agent, freight forwarder or transporter to handle customs declarations. Where that is the case, the agent needs a written instruction from the business to account for the VAT this way, since an agent cannot decide this on the business's behalf.

Keeping that written instruction alongside the completed declarations gives the business something to point to if its figures are ever questioned later.

What a C79 certificate shows

When you import goods and pay import VAT at the border, HMRC keeps a record of how much import VAT you have paid. GOV.UK calls the certificate that sets this out a C79 certificate. It shows the import VAT paid against your EORI number, the reference HMRC and customs use to identify your business, and it is the document you need to reclaim that VAT as input tax on your VAT Return.

Getting your certificate

HMRC makes your C79 certificate available to you online. You reach it through the same government service you use for your EORI number and your customs declarations, and it covers the import VAT paid against your EORI number for the period it reports on.

A certificate does not stay available indefinitely. GOV.UK's current guidance sets out how long you can view and download each one, and that period can change, so it is worth checking before you assume an older certificate is still there. If you need a certificate from a period that has already dropped off, GOV.UK's guidance explains what to do next.

Goods bought from abroad worth £135 or less currently don't attract import VAT at the border under a relief GOV.UK sets out for low-value consignments. The seller usually accounts for the VAT instead, as part of the sale.

The government has published draft legislation to remove this relief, according to GOV.UK (October 2028). That means the £135 threshold is not yet gone. It remains the rule in force until Parliament passes the change into law.

What this means for now

A business bringing in low-value goods can still rely on the relief as it stands today. Anyone planning ahead for a change in supply costs should check GOV.UK's own pages before treating the removal as settled, since a draft can be amended or dropped before it becomes law.

Every product has its own rate of Customs Duty, and the rate sits with the commodity code that describes it. Because codes and rates are reviewed and changed, the figure that applies to a particular product is checked against GOV.UK's Trade Tariff tool.

Before using the tool, a business needs the commodity code for the goods, or enough detail about them to find one through the Commodity Codes and the Trade Tariff guide. The tool also asks where the goods come from, because the country of origin can change the rate that applies, and because a trade agreement between the UK and that country can bring a lower rate into play.

What to have ready before checking

• The commodity code for the goods, or a clear description if the code has not yet been found
• The country where the goods were made or last substantially processed.
• Whether a trade agreement between the UK and that country might apply, so the tool can show any preferential rate alongside the standard one

The Trade Tariff tool shows the rate that applies on the day it is checked. It does not work out the duty owed on a particular shipment, and it can point to the wrong code, or the wrong rate, if the details entered do not match the goods. Checking the description against the goods first, before reading off the rate, is the way to avoid declaring against the wrong code. Where a declaration is made on a business's behalf, the person making it will need the same code and the same detail about origin to get the rate right.