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zk433 zk433 is offline
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Join Date: Jun 2008
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import duty required if supplier is shipping direct to customer?

Hi all,

I've found it difficult to find the exact information I'm after regarding import duty so hoping someone here can help.

My situation is that I'm starting business in the UK as a sole trader and I'm not VAT registered. I have come across a manufacturer in India whos products I wish to sell on eBay and on an external website in future. I will list the items as if they're my own and once I have a sale I will send the details on to the manufacturer who will ship direct to the customer and then invoice me for the total. Most likely paid via Paypal using a business Paypal account. This account will also be used to receive money from customers.

My question is do I have to pay import duty and/or VAT on the items being sent to the customer? If so, how can I go about doing this without actually involving the customer? Can I pay this in advance/post-delivery somehow directly to HMRC without involving the customer? This'll avoid hassle for the customer and also prevent them from seeing the cost price of the item. I have read about deferment accounts but not sure if this is what I need or even whether I'd be allowed to open one with no business track record as of yet.

If I don't have to worry about any import duty/VAT and it is the manufacturer's duty to do so, does any liability fall onto me if their declarations are inaccurate?

Also, is the only advantage in not registering for VAT (assuming you are below the threshold), less paperwork?

Sorry for the long post and thanks in advance.

ZK
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m8internet m8internet is offline
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Join Date: Apr 2008
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You're not VAT registered, so VAT will apply if the seller is required to add it

Import duty is normally paid as the liable goods enter the country, either by the person on the delivery or by the sender prior to delivery
If you want to avoid the customer being liable for import duty, then you will need to pay the seller and make sure they apply this on the postage
Personally, this where things usually fall over!
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James Smith's Avatar James Smith James Smith is offline
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First things first:

Are you taking legal title to the goods?

Or are you acting merely as a selling agent?
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zk433 zk433 is offline
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Thats a good point, I never really thought about ownership. I don't have any contract in any way with the seller so this is not really defined. I expect from a duty/tax point of view it would be better to act as an agent only and not take ownership? Am I legally obliged to have some sort of contract with the manufacturer about our relationship?

Is it actually possible to be an agent if I set my own price for the item, of which the manufacturer is not aware, and then to be invoiced by them and pay them from my account, so no actual contact between customer and manufacturer other than the delivery of goods?
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James Smith's Avatar James Smith James Smith is offline
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hmmm i would tread very carefully here indeed.

It looks to me as if you are taking title and the other entity is just acting as a "drop shipper" which is odd to say the least for something dispatched from overseas - I would have thought the cost of sending the items to the UK singly rather then by the container load would make this a no-go but it depends. It works for CD's for example as the extra postage is saved by the zero rating for VAT under the de-minus limit.

If you are taking title then yes you are responsible for the VAT import duty etc.

Regards,
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zk433 zk433 is offline
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Thanks for the info James. My main reason for using the drop shipping method is to cut my costs (and time) by not having to forward on to the customer. Financially it works out ok as the manufacturer offers me a delivery cost proportional to the order amount, regardless of the order size. Also, they have a large range in the item I wish to sell so it wouldn't really be feasible to stock up at this point as I'm not sure which styles will sell well and don't want to be left with surplus stock. I hadn't really thought about the limit up to which the VAT would be zero-rated but I think this is somewhere around £18? Each of my customer's orders would almost certainly be above this value so I probably wouldn't be able to take advantage of it anyway.

My research continues, thanks again.
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James Smith's Avatar James Smith James Smith is offline
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The "VAT free CD" loophole only works as all the operations are overseas. It wouldn't apply in your case.
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networker08 networker08 is offline
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There is something called passport to export that is worth looking into.
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zk433 zk433 is offline
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Cheers for the info. Unfortunately that may not be too relevant for me as I'm primarily looking to import goods, or have them drop shipped to be more specific.

Another bit of info I've found is that import rates can vary depending on the country you are importing from. Not geographical categories as in EU and non-EU but preferential and non-preferential countries, with preferential countries largely being developing countries under which India is categorised so may look into this too.
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