Hi there,

Used solar for a while,so far so good. Now have a question: say, i imported £10000 goods from Tailand, they shipped it to the UK then I received Import VAT & Duty Invoice £2200 (£2000 VAT and £200 duty) from shipper and invoice £98 for delivery. So i paid £2298 before I got the goods delivered to me. So how can i record these transaction? On their invoice, all the fees are non-taxable, just wondering i need to choose 0% as vat rat or out of scope? Thank you in advance for your help.

Hi Mark,

When you import goods you pay VAT on the goods AND the customs duty AND shipping charges. For details, see 'Valuation of Imported Goods for VAT purposes' on this page:
http://www.businesslink.gov.uk/bdotg/action/detail?r.l5=1083237911&r.s=sc&r.l4=1083128326&r.l1=1073858808&r.lc=en&r.l3=1083127480&r.l2=1083126673&type=RESOURCES&itemId=1083238557

Therefore, if your supplier charges you £10,000 for the goods and you pay £200 duty and £98 shipping then the total value is £10,298. The VAT rate is 17.5% so the VAT amount will be £1,802.15. Therefore the total you pay before delivery will be £2,100.15

To record this in Solar Accounts, create a new Money Paid Out transaction. Set the Amount Paid to £2,100.15. Set the Type to 'General Payment' and the VAT Treatment to 'Purchase of Goods from Supplier Outside the EU'. The account table should have four lines:
Line 1: £11,750 with VAT rate 17.5%
Line 2: -£10,000 with VAT rate 0% (note: negative amount)
Line 3: £235 with VAT rate 17.5%
Line 4: £115.15 with VAT rate 17.5%

Both lines 1 and 2 should be allocated to the same account (usually 'Cost of Goods Sold').

Cheers,

Thanks for quick response. I should make it clearer. OK, let's say:

On 01 April 2010, I received suppliers pro-forma invoice £10000 (includes goods value and shipping charge), I made payment £10000 to the supplier, then record a general transaction from 'cheque account' to 'prepayment' account. On 30 April 2010, I received the invoice from supplier, then i recorded a Money Paid Out transaction (amount £10000) as normal, except pay from 'prepayment account' not ' Cheque Account'.

On 03 May, the shipping company's UK agency issued me 2 invoices: one is VAT & Duty Invoice, another one is invoice to cover the UK agency's administration fees and delivery charge (deliver goods from port to my door). Details are:

Invoice 1: Duty: £200; VAT: £1785 (both non-taxable)
Invoice 2: Administration Fee: £35, Delivery cost: £63 (both non-taxable)

To record the Duty & VAT invoice: Create a new Money Paid out transaction: Set the amount paid to £1985. Set the Type to 'General Payment' and the VAT Treatment to 'Purchase of Goods from Supplier Outside the EU'. The account table has 3 lines:
Line 1: £10000 with VAT rate 17.5%, line total £11750
Line 2: -£10,000 with VAT rate 0% (note: negative amount), line total -£10000
Line 3: £200 with VAT rate 17.5%, line total £235 (why I choose VAT rate as 17.5%? their invoice said it’s non-taxable)

To record the invoice 2: Create a new Money Paid out transaction: Set the amount paid to £98. Set the Type to 'General Payment' and the VAT Treatment to 'Purchase of Goods or Services from UK Supplier. The account table has 2 lines:
Line 1: £35 with VAT rate 0%, line total £35
Line 2: £63 with VAT rate 0%, line total £63

As i'm VAT registered, so i want to make the things right and don't mess up the VAT return. I understand when they work out the VAT amount, they worked as (10000+200) x 17.5% = 1785, but on their invoice, it said 'customs duty' non-taxable, how can I record it as you did in your reply 'Line 3: £235 with VAT rate 17.5%'? I'm just so confused.

Any suggestion? Thanks!

Hi Mark,

You should contact your shipping company's UK agency to find out why they aren't charging VAT on customs duty, agent fees and shipping to your door. Then check their reasons with HMRC (phone 0845 010 9000). If it's acceptable to them, you can record those costs with VAT set to 0%. That is:
Line 3: £200 with VAT rate 0%

Cheers,

hi there
I have been importing goods from asia for over ten years and have used this method for vat treatment etc. I have been inspected by hmrc and they have been happy with my accounting procedures regarding this.

assuming goods are supplied FOB which is by far the most common way of doing business internationally.

prior to the goods being released from the bonded warehouse by the import agency you will need to pay vat on the declared value of the goods supplied FOB.

you should raise an invoice for the FOB value of the goods or if not supplied FOB the value of the goods plus the exporting agents charges for boarding the goods. this invoice should have the vat rate set to the standard rate even if they are exempt goods such as food etc. you should then manually adjust the vat amount to zero.

after you have paid the vat you should raise another invoice for zero and manually adjust the vat amount to the vat charged by hmrc this will enable you to reclaim the vat.

you should now have for example if £10k goods imported 2 invoices as follows

supplier invoice 1
goods =£10,000.00 & vat £0.00

supplier nvoice 2
goods £0.00 & vat £1750.00

after this you will need to pay the uk agents costs plus any vat. they will issue you with a vat invoice for this which can treated as normal.

Thank both of you.

If i follow Conrad's suggestion to create a invoice for zero and manually adjust the vat amount to the vat charged by hmrc, the problem is Solar Accounts does not allow me to do so but warned me as 'Amount cannot be zero'. I know that this can be done in Sage.

Hi Mark,

In Solar Accounts you will need to have two lines. Assuming the 'Prices Include VAT' box is ticked, you would have:
Line 1: £11,750 with VAT at 17.5%
Line 2: -£10,000 with VAT at 0%

Cheers,