Combining DDP and Flat Rate VAT Scheme for Imports
I’ve been consulting with my accountant and reaching out to customs brokers and VAT experts, but I’m still unclear on a few things. If anyone has experience with importing goods under DDP from China to the UK, I would appreciate your insights on how import VAT is managed. Specifically, have you encountered any challenges due to the lack of import documentation when using DDP?
With DDP, my supplier handles shipping, import duties, and VAT. However, they’re unable to provide proof of the import VAT they’ve paid, as the customs clearance agent is listed as the importer rather than my company. As a result, I’m unable to reclaim the import VAT included in the DDP shipping costs.
On the plus side, since I operate under the flat rate scheme, there’s technically nothing to claim back anyway, so this simplifies the calculation of my landed costs since everything appears on a single invoice. My sales are primarily B2C within the UK, with about 10% of my business going to international customers.
I’d love to hear if anyone has dealt with these issues while using DDP shipping and whether you think the flat rate scheme is beneficial in this context. Thank you!
2 Comments
It sounds like you’re navigating a complex situation with DDP imports and the flat rate VAT scheme. While I’m not a tax advisor, I can share some insights that might help clarify.
When using DDP (Delivered Duty Paid), the supplier is indeed responsible for all shipping costs, duties, and VAT until the goods arrive at your doorstep. However, as you noted, this can lead to complications regarding claiming back VAT if you’re not the named importer on the documentation. Since the customs clearance agent is listed instead, you won’t have proof of VAT paid in your name, which would typically be necessary for claiming input VAT, regardless of being on the flat rate scheme.
Being on the flat rate VAT scheme simplifies your accounting but does limit your ability to reclaim any input VAT, which, in your case, seems fine since you mentioned that you are primarily selling B2C. The flat rate scheme can be advantageous for businesses with low input costs, as it allows you to keep a percentage of your sales as profit without the complexities of VAT returns.
That said, if your business grows and you start dealing with more imports or higher value goods that might have significant VAT implications, you might want to reconsider how you’re handling imports. It’s also worth discussing with your accountant the potential benefits of switching to the standard VAT scheme if that would allow you to reclaim input VAT on certain purchases.
In terms of documentation, it’s crucial to keep clear records of all transactions, and if you continue with DDP, ensure that you maintain communication with your suppliers about what documentation you can acquire. You might also want to touch base with customs brokers who have dealt with similar situations to see if they have recommendations or solutions to ensure you are fully compliant.
Your approach seems practical for your current business model, but keep an eye on any changes in your operation or growth which might necessitate a review of your VAT strategy down the line.
Thank you for sharing your experience with DDP and the flat rate VAT scheme! It’s great to see discussions around navigating the complexities of import VAT and shipping logistics, especially in the current landscape.
One point worth considering is the impact of the flat rate scheme on reporting and cash flow. While it simplifies your VAT calculations by allowing you to pay a fixed percentage of your turnover and avoiding the intricacies of reclaiming input VAT, it’s crucial to remember that the flat rate scheme can sometimes lead to a higher overall VAT liability compared to traditional VAT reporting, particularly when you’re dealing with high-value goods.
Additionally, while the inability to reclaim import VAT through DDP might seem like a hurdle, it could serve as an opportunity for you to evaluate whether this approach aligns with your overall business strategy. If most of your sales are B2C and your customers are not VAT registered, maintaining a streamlined invoicing process with DDP might actually benefit your operational efficiency.
For those considering this combo for the long term, it might be worth consulting with your accountant to run a few scenarios comparing the flat rate scheme elasticity against standard VAT reporting, especially if you anticipate growth in your international sales. It’s also helpful to keep abreast of any changes in customs regulations post-Brexit, as these could have further implications on your import processes.
Looking forward to hearing more insights from others on how they manage similar issues!