Transport Costs / Definitions and Scenarios

Definitions

Value of goods

There are six different ways that the value of the goods can be calculated, but by far the most common is the transaction value of the goods. That is, the price paid or payable by the buyuer to the seller. See: HMRC: Prepare to work out the customs value of your imported goods for more information

Duty

(Usually) a percentage of the value of the goods that must be paid to HMRC.

Duty base

The sum of all of the costs that make up the "customs value" incurred outside of the UK.

VAT

Value Added Tax - a percentage of the value of the goods that must be paid to HMRC. Importers can postpone VAT payments using the "PVA" process.

VAT base

The sum of all of the costs that make up the "customs value".

Delivery costs

The cost of transport, insurance, loading and handling charges, container charges, terminal charges and any other charges invlolved in moveing the goods from one place to another.

Point of entry into the UK

Also known as the "place of introduction":

• Sea freight: the port of importation into the UK
• Air freight: the point where the UK border is first crossed during the air journey
• Road or rail freight: the point where the goods first pass a customs office, this is usually the point where the goods cross the UK border
• Post: the delivery address

Point of delivery into the UK

The place where the goods are delivered for final use by the buyer

UK-only delivery costs

The delivery costs from the point of entry into the UK to the point of delivery. Delivery costs in the UK can be specified as follows:

• Method 1: the actual delivery costs
• Method 2: nationally-agreed rates (see: IMPS04400 - Value for import VAT: normal rules: methods of calculating import VAT)

Scenario 1

• The delivery costs are included in the value of the goods
• The delivery costs are to the point of entry into the UK

Duty is charged on the value of the goods

VAT is charged on:

• the value of the goods
• the duty amount
• the UK-only delivery costs

Scenario 2

• The delivery costs are included in the value of the goods
• The delivery costs are to the point of delivery into the UK

Duty is charged on:

• the value of the goods
• minus the UK-only delivery costs

VAT is charged on:

• the value of the goods
• the duty amount
• the UK-only delivery costs

Scenario 3

• The delivery costs are not included in the value of the goods
• The delivery costs are to the point of entry into the UK

Duty is charged on:

• the value of the goods
• the delivery costs to point of entry in the UK

VAT is charged on:

• the value of the goods
• the duty amount
• the delivery costs to point of entry in the UK
• the UK-only delivery costs

Scenario 4

• The delivery costs are not included in the value of the goods
• The delivery costs are to the point of delivery into the UK

Duty is charged on:

• the value of the goods
• the delivery costs to point of delivery in the UK
• minus the UK-only delivery costs

VAT is charged on:

• the value of the goods
• the duty amount
• the delivery costs to point of delivery in the UK