I regularly receive emails & blog comments from people who have imported something from China – shipments that should have been declared through customs so that import duty and VAT are paid – but they arrive without any such charges.
This usually happens because Chinese suppliers UNDER-DECLARE the value of the goods sent to you. E.g. you bought something for £200 but the supplier marks the package as a GIFT and puts $20 as the value, which by law means there are no taxes to be paid.
For personal use this doesn’t create much problems BUT if you’re a business owner or sole trader, this is a big issue as you can’t properly book the transaction as you haven’t paid any taxes. And even if you do, if you get an audit from HMRC they will quickly find out that you haven’t paid taxes on these purchases which could lead to penalties.
If your goods are delivered via sea freight or air freight, then there usually won’t be any problems as the shipping company will by default process your shipment through customs.
Problems usually occur with courier companies and Royal Mail (airmail deliveries).
First, I will give some advice on what to do to PREVENT situations like these from happening:
1) Always, always ask your supplier to attach the REAL invoice with the REAL value listed on the outside of the package and to fill in any attached customs forms properly. In many cases this will help but it’s still quite common for Chinese suppliers to under-declare your shipment, even if you’ve asked them not to.
2) If your goods are being sent via courier (DHL, FedEx, UPS etc.) then once it’s been dispatched and you have the tracking information to hand, you should call the courier and inform them that this shipment requires customs clearance. They’ll usually give you the contact details for their customs department, who you can send the invoice and proof of payment to. This way, once the shipment arrives in the UK they’re already prepared and ready to do the proper customs clearance.
Now, let’s cover situations when you receive your goods without paying any taxes:
1) If the package was delivered by a courier, chances are that you will still receive an invoice for VAT & import duty as some courier companies don’t ask for up-front payment but instead send a tax invoice to you a few weeks later, via email. But it could also be the case that your goods were not declared. So what to do?
Simply call the courier company responsible for your delivery and ask them whether the shipment was cleared through customs and if an invoice is on its way to you.
If that’s not the case, inform them that you need to declare this shipment and they will let you know the next steps to take.
2) On the other hand, if your package is delivered by Royal Mail without you paying any taxes then you know for sure that it slipped through customs. As with Royal Mail you’re required to pay any taxes due BEFORE you receive your shipment. This can be done online:
So if you don’t get charged by Royal Mail, it means that your goods weren’t cleared through customs… So at that point you need to fix this, which you can do by filling in a special form called BOR286 – used when you believe import duty/VAT was wrongly charged on an item you imported by post.
You can find and download this form here:
Lastly, don’t be surprised to see an extra processing charge on these tax invoices! Each courier company has a slightly different fee for customs clearance but it’s usually around £10-£20. Royal Mail’s fee is £8, which is the cheapest I’ve seen.
So make sure you take this fee into account when calculating the tax on goods you import for re-sale. For very small/first-time orders this fee can actually make a significant change to your projected landed cost and therefore your potential profit!