VAT/Tax on Overseas Repairs

[Big Vern]

Evening All,

A question to anyone with professional knowledge or personal experience, if I may...

Am I liable to pay tax (VAT) and import duty on an item I sent to a non EU country for repair? I have always been under the impression that 'for repair' meant no nasty tax bill, but I am suspecting that this is not the case? I am about to send some items to the USA for repair, but want to check where I stand before I send them out. It is for cosmetic repair, so they will not 'look' the same, for sure...I don't want any nasty surprises when I get them back. :eek:

Thanks in advance...I am sure someone here has the answer

Cheers,

Paul.

[Andrew B]

Hi, I think this may be what you are referring to. It's called "Outward Processing Relief"or OPR.

http://www.hmrc.gov.uk/vat/managing/international/imports/opr.htm

[Oldpinkman]

Oh goodie - a tax question. About time someone pandered to the Chartered Accountant on this forum.

This is one of those cases, I suspect, where my informal UK tax law applies, that in ignorance everyone will get it wrong, and the right tax will be paid anyway.

You are liable to pay VAT on services in principle. If you have your hair cut you pay VAT. Unless the hairdresser is not registered for VAT because of turnover below the VAT threshold. Or the hairdresser is in the USA (where you would pay local sales tax). VAT is f****ng complicated generally, and VAT on services especially so. There are all the "place of supply" factors to deal with.

I take it you are not a VAT registered trader. In which case you are unlikely, pragmatically, to take advantage of the complex OPR arrangements - although they do not exclusively apply to registered traders, they are just a ball-ache. If you were, you would ONLY have to pay VAT and duty on the value of the repair service, by declaring lots of things on the original "export" and then on the subsequent "import". But the key point is YOU DO HAVE TO PAY VAT on the repair.

What you don't have to pay VAT and duty on, is the underlying or value of the item.

I have not actually dealt with this situation, but there are so many examples of the wrong procedure being un-noticed by HMRC, that I expect it to apply here. My guess would be that your repairer will return the items with a customs declaration that the goods were "items for repair" with a value of $1, and an attached customs declaration value of the amount you paid for the repair. Assuming that exceeds £34 you will then have VAT and duty to pay on it. Which would be the same as the VAT and duty you would have paid if you had gone through the whole OPR rigmarolle with a declared customs import value for the goods of £2000, less the relief for the value before the repair of £1800 etc.

The only small risk is that customs challenge the value of the item at $1. If you buy a quad bike from china , and the nice chinese ebayer sends it through as "gift" value $5 or "samples - no value" HMRC have learned to spot that one and will look to evidence of payment for a value (and they just keep it till they are happy)

But you should, and almost certainly will, pay VAT and duty on "the value added" by the repair - which before you get cute, is the price you paid for it! It depends on the value of the item, but if it is modest, I wouldnt worry about relying on that informal arrangement of the customs documents declaring the value at import as the value paid for the repair plus a nominal $. It's not strictly right, but neither is so much stuff I see "unchallenged" by HMRC.

Hope that helps

Richard