HMRC have issued a new brief reconfirming HMRC’s view that only the owners of goods should import goods into the UK, and reclaim import VAT. This makes clear HMRC’s policy applies to a wide range of supply chains beyond toll manufacturing arrangements. This guidance should be reviewed by anyone importing goods – including those restructuring their arrangements or who will be newly importing goods from the EU as a result of Brexit. More detail is set out below.

HMRC 2019 brief

In April 2019, HMRC published a brief setting out HMRC’s view that only the person with legal title to goods is entitled to recover import VAT. The brief focused on two scenarios: goods imported in to the UK by toll operators and businesses who sell the goods before importing them into the UK. In those instances, HMRC stated their policy was that the owner of the goods, with legal title, should be the importer of record and reclaim the import VAT. HMRC explained this was not a change in policy but acknowledged that accepted business practice typically did not follow the position. HMRC therefore allowed a short transition period for businesses to change their arrangements and the party responsible for importing goods into the UK.

A number of businesses made representations to HMRC in response to the brief asking for clarification on the scope of HMRC’s policy and explaining why they considered it overly restrictive. In some cases, persons other than the owner may be using the goods to make taxable supplies and should in principle be entitled to recover import VAT they incur. In addition, HMRC’s brief focused on the person with legal title, which may not always reflect the owner of the goods for VAT purposes.

HMRC 2020 brief

HMRC conducted a detailed review of their position following the representations made to them and have now published their conclusions in a new brief. HMRC stand by their policy, and have made clear that it applies across the board. HMRC have also now explicitly set out their position in a number of additional scenarios:

  • Agents: Undisclosed agents who import and supply goods in their own name can reclaim the import VAT as input tax, but must also account for VAT on the onward sale. This is because imports by agents are explicitly provided for in the VAT law. This confirms HMRC’s informal guidance following the release of the 2019 brief.
  • Retail warehousing: Where retail goods are entered into warehouses where VAT and duty is suspended (e.g. customs warehouse), import VAT generally becomes due once the goods are removed from the warehouse and enter free circulation. HMRC have said it is incorrect for retailers to import the goods, use their deferment account and pay the import VAT if they do not own the goods at the time of their removal from the warehouse (because they only acquire the goods at the point of delivery to their distribution centres / retail premises). To avoid import VAT becoming a cost for the retailer, or the overseas suppliers having to import the goods and register and charge UK VAT on the sale to the retailer, HMRC have suggested that retailers should take ownership of the goods prior to their being removed from the warehouse. This could impact anyone with call-off / consignment stock arrangements for imported goods.
  • Goods temporarily imported for repair: Goods temporarily moved to the UK may potentially be imported using the inward processing procedure to avoid import VAT becoming due. However, if the goods are released from inward processing to free circulation HMRC will only allow the owner to recover import VAT. The same treatment applies to other special procedures, such as outward processing or temporary admission. Businesses using reliefs where someone other than the owner imports the goods should consider their entitlement to recover any import VAT should it become due.
  • Goods imported for onward leasing: Where leased goods are imported HMRC consider the lessor should act as importer and only they are entitled to recover import VAT. The person leasing the products cannot recover import VAT in HMRC’s view, even if using the equipment in their business activities, as they do not take ownership of the goods.

It is worth noting HMRC have removed the reference to the importer having to have ‘title’ to the goods; HMRC’s latest brief only sets out the position by reference to the ‘owner’ of the goods, which may be arguably broader than the person with legal title.

Overall, we consider this new brief to be unhelpful to businesses, as many businesses importing goods in the course of their business without taking ownership of the goods may now incur irrecoverable VAT. Businesses should review any arrangement where anyone other than the owner is importing goods to assess whether import VAT may be a cost.

Since HMRC published their brief, the CJEU has issued an order in Case C-621/19 Finančné riaditeľstvo Slovenskej republiky v Weindel Logistik Service SR spol. s r.o. which supports HMRC’s position. The case concerned a company that entered into a toll manufacturing arrangement: it imported goods from outside the EU in order to repackage them and subsequently delivered the goods to other Member States, with the customer retaining ownership of the goods throughout the process. The CJEU held that import VAT cannot be deducted by a person who does not have a right to dispose of the goods as owner and the import costs are not incorporated into the price of its supplies. Practically, when this will apply could still be open to interpretation. However, in light of this endorsement of their views, it is likely that HMRC will maintain the position set out in their brief despite the difficulties to businesses this may present.


Kathryn advises multi-national businesses on VAT related to planning, structuring and reorganisations, and is experienced in managing tax authority audits and disputes. Kathryn has had a lead role on advising clients across a number of sectors including those in technology, finance and retail on VAT and Brexit-related developments, assessing the implications of VAT changes and post-Brexit structures.


Anastasia focuses on indirect tax law and advises clients on a broad range of tax issues, with an emphasis on the management and resolution of complex VAT disputes. Her practice includes assisting clients to navigate complex VAT audits, working with multinational companies to negotiate the settlement of tax disputes and, where necessary, conducting litigation against HMRC decisions and assessments.

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