New Update to VAT Tax Laws on Returned Goods Relief
In June 2013, HMRC introduced new laws for VAT tax relief on return goods that are traded between countries in the European Union and beyond. The notice explains how importers can reclaim tax relief of custom duty that are suspended or relived at the time the trade occurred. Customs notice 236 deals with importing returned goods free of duty and tax.
The principle requirements under the new rules of the Returned Goods Relief (RGR) determine that goods must have been in free circulation and that all duties and taxes have been paid when the goods were originally exported from the EU. The goods must also be in the same state they were upon return as they were when they were exported. The law also extends to triangular exchanges with countries outside the EU.
Return of goods in an unaltered state
If goods that are re-imported are subsequently worked on to repair or improve the goods to upgraded models or higher specifications that subsequently increases the sales value, the tax relief of re-imported goods will not apply. In such circumstance the transaction will be null and void and tax duties repaid on the import of the upgraded goods.
Likewise, the goods must not have been exported for the purpose of repair or upgrade. Only if the good are being returned in an unaltered state will tax relief on imports be possible. There is also a three year limitation from the original export date. The types of goods that are eligible under the new rules are:
- Personal effects such as sports equipment and vehicles
- Hired or leased good used for professional and commercial contractual purposes
- Goods originally exported under the Outward Processing procedure
- Goods previously entered to the Inward Processing procedure
- Goods previously entered to free circulation in EU countries
- Goods temporarily exported from the EU using ATA or CPD carnet
- Re-imported pallets and containers
You can find additional information about all of the above conditions on the HMRC website
The advantages of RGR rules for VAT registered persons
If you are registered to pay VAT, RGR saves you having to pay or reclaim VAT again. This applies in situations when goods are exported outside the EU and returned due to the goods not being sold or tools that are being returned after contractual use outside the EU. If you are registered for VAT, but do not want to claim RGR you also have the option to pay or defer the VAT up its return. Most goods are liable to VAT at a rate of 20%.
If you would like more advice about the new VAT tax rules for RGR or any other tax advice relating to your business, call us today and speak with an experienced member of the Taxaccolega team, a low fixed fee accountant in London, by emailing email@example.com or calling our free phone number on 08000 235 234. We look forward to hearing from you.