Question to the HM Treasury:

To ask Her Majesty's Government what assessment they have made, if any, of the cost to business of applying VAT on imports from EU states.

Before the UK left the EU, sales of goods from the EU to UK customers were already subject to VAT. This has not changed. Prior to the end of the transition period, VAT was collected and paid through the VAT return system. For sales to consumers or non-VAT-registered businesses, VAT was either due in the EU Member State or in the UK, depending on whether the volume of the supplier’s sales made into the UK breached an annual threshold. For sales to VAT-registered businesses, the VAT registered-business would be responsible for accounting for the VAT on a VAT return through what is known as a ‘reverse charge’. The VAT-registered business could reclaim this VAT as input tax on the same VAT return, subject to the normal recovery rules. Only sales to the UK from outside the EU were subject to import VAT collection at the border.

Now that the transition period has ended, the UK has used its freedom from EU rules to create a fairer and more robust tax system, while also complying with World Trade Organisation rules by treating EU and non-EU goods the same. For goods in consignments up to £135, VAT is due at the point of sale. Where a UK VAT-registered business provides its VAT registration number to the supplier, the VAT registered business is responsible for accounting for the VAT due on the goods through a reverse charge. For goods in consignments over £135, import VAT is due and UK VAT-registered businesses can choose to use ‘postponed VAT accounting’. Accounting for VAT on a VAT return in these ways allows businesses to reclaim it as input tax on the same VAT return, as was the case under the previous rules, and ensures continuity for businesses.