ChatterBank1 min ago
Customs Charges
9 Answers
I have been sent a small package from the United States (I'm in the UK), containing a small and light musical instrument. I received a note this morning telling me that I need to pay £141.69 before it will be delivered. This charge, raised by Border Force on behalf of HM Revenue and Customs shows a breakdown of: Customs Duty = £17.41 Import VAT =£112.28 and Clearance fee of £12.00.
I would be very grateful if someone could explain a bit why these charges have to be paid and why they are so high on such a light package. What sort of work involves 'clearance' (a tick on a form?) What sort of 'Value' has been added to warrant an import VAT charge on a ukulele? It just feels like I've been ransomed and robbed by gangsters. It might help me feel better if I knew if there was some genuine work involved to justify this fee. Thanks...
I would be very grateful if someone could explain a bit why these charges have to be paid and why they are so high on such a light package. What sort of work involves 'clearance' (a tick on a form?) What sort of 'Value' has been added to warrant an import VAT charge on a ukulele? It just feels like I've been ransomed and robbed by gangsters. It might help me feel better if I knew if there was some genuine work involved to justify this fee. Thanks...
Answers
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The first thing that's done by HMRC (or, more accurately by their agents, Parcelforce Worldwide, who have the contract for assessing routine import charges) is to decide upon the value of the item being imported. (As Woofgang points out, that's not necessarily the same as the actual price paid for an item). They've decided that your ukulele is worth £544....
16:28 Wed 28th Aug 2019
The tax and duty are based on the value of the item not the weight.
You pay the same amount of VAT as you would had the ukelele been bought in the UK. The VAT is normally 20% of the purchase price.
Import duty is normally 2.5% but that is based on the purchase price plus delivery charges and any insurance.
The clearance fee is a standard amount (I THINK from memory it's waived below a certain amount.)
Royal Mail has said the fee covers,
"Operating the postal customs depot
Handling the package for customs examination
Opening, repacking and resealing the package if required
Paying the charges to HMRC on a recipient’s behalf"
You pay the same amount of VAT as you would had the ukelele been bought in the UK. The VAT is normally 20% of the purchase price.
Import duty is normally 2.5% but that is based on the purchase price plus delivery charges and any insurance.
The clearance fee is a standard amount (I THINK from memory it's waived below a certain amount.)
Royal Mail has said the fee covers,
"Operating the postal customs depot
Handling the package for customs examination
Opening, repacking and resealing the package if required
Paying the charges to HMRC on a recipient’s behalf"
The first thing that's done by HMRC (or, more accurately by their agents, Parcelforce Worldwide, who have the contract for assessing routine import charges) is to decide upon the value of the item being imported. (As Woofgang points out, that's not necessarily the same as the actual price paid for an item). They've decided that your ukulele is worth £544.
Then they calculate the Customs Duty to be paid. The rates vary enormously, depending upon the type of goods you're importing. (If you'd made the mistake of importing cotton-based clothing from the USA, you'd have got hit for 12% as the regular duty, plus a further 15% because the USA breaches WTO rules by subsidising their cotton farmers), The rate to be paid on stringed musical instruments is quite low, at just 3.2%. That's where the £17.41 comes from.
Then they work out the VAT to be paid. VAT is charged at 20% of the TOTAL value of the instrument, INCLUDING the Customs Duty to be paid on it. (Yes, that is a tax on a tax!). So they add £544 and £17.41 together, to get £561.41. Then they calculate 20% of that, which is where the £112.28 comes from.
Then Parcelforce Worldwide want paying for doing their sums, contacting you and collecting the charges on behalf of HMRC. HMRC don't pay them directly for their services but they have agreed that Parcelforce Worldwide can charge a flat rate of £12 for parcels with a value of less than £873. (The charge goes up to £25 for higher value parcels).
It's all perfectly normal and, in many ways, reasonable. (HM Government clearly don't want people to be able to avoid paying VAT just by buying from abroad. To permit that to happen would harm the economy and also harm the interests of the British businesses who would be losing trade).
At the moment you only get clobbered for such charges when you're importing from a non-Eu country. After Brexit you'll have to pay them when importing goods from EU countries as well.
Then they calculate the Customs Duty to be paid. The rates vary enormously, depending upon the type of goods you're importing. (If you'd made the mistake of importing cotton-based clothing from the USA, you'd have got hit for 12% as the regular duty, plus a further 15% because the USA breaches WTO rules by subsidising their cotton farmers), The rate to be paid on stringed musical instruments is quite low, at just 3.2%. That's where the £17.41 comes from.
Then they work out the VAT to be paid. VAT is charged at 20% of the TOTAL value of the instrument, INCLUDING the Customs Duty to be paid on it. (Yes, that is a tax on a tax!). So they add £544 and £17.41 together, to get £561.41. Then they calculate 20% of that, which is where the £112.28 comes from.
Then Parcelforce Worldwide want paying for doing their sums, contacting you and collecting the charges on behalf of HMRC. HMRC don't pay them directly for their services but they have agreed that Parcelforce Worldwide can charge a flat rate of £12 for parcels with a value of less than £873. (The charge goes up to £25 for higher value parcels).
It's all perfectly normal and, in many ways, reasonable. (HM Government clearly don't want people to be able to avoid paying VAT just by buying from abroad. To permit that to happen would harm the economy and also harm the interests of the British businesses who would be losing trade).
At the moment you only get clobbered for such charges when you're importing from a non-Eu country. After Brexit you'll have to pay them when importing goods from EU countries as well.
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