- VAT Compliance Risks: Many UK businesses importing goods for processing, repair, or servicing face significant VAT risks due to misconceptions about ownership rules. Only 1% of businesses may be aware that if they do not own the goods being imported, they cannot reclaim import VAT, resulting in unexpected costs and potential penalties.
- Postponed Import VAT Accounting Misunderstandings: Companies using Postponed Import VAT Accounting without owning the goods are not eligible for VAT deductions. This misunderstanding can lead to substantial financial liabilities, as illustrated by the case of Repairs R Us UK Ltd, which incorrectly accounted for £70,000 in import VAT.
- Need for Inward Processing Authorization: To mitigate VAT impact, businesses should consider applying for Inward Processing authorization, allowing them to import goods without immediate payment of import taxes. MHA advises businesses to review their processes and consider retroactive applications to avoid hidden VAT debts and improve cash flow and profitability.
Source Andrew Thurston
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