Importing items from China via Ebay and other online stores – customs duty, VAT and handling charges

It is very easy to make purchases direct from China when purchasing online. It is even possible to do so by accident if buying in a hurry – who would think to check whether a low-value item costing £1.01 inc postage would come from abroad?

There are risks in buying from China – an alleged high risk of buying counterfeit items for one – but costs can be very low, making the risks worthwhile. Ebay’s seller feedback is probably a good guide to whether you will receive a usable item. Some type of product may be lower risk – many buyers of Chinese-branded electronic items are very happy with their buying experiences.

What is less than clear when buying from China are the costs and delays arising from the VAT and import duty that may be payable. The first thing to say is that enforcement is not overly-rigorous, with many smaller packages simply arriving in the post within a week or two of order. Unfortunately the process and costs for items that do get caught are far from transparent, so we have tried to make it easier to understand.

Note that this information is for guidance only – you should check the latest version of HMRC ‘Notice 143: A guide for international post users‘ for authoritative information.

A gift or a purchase?

The duty and VAT payable depend to some extent on whether the import is a gift (being sent to an individual abroad to an individual in the UK). If someone in the UK has paid for the item then it isn’t classed as a gift.

Cost

Does your item cost what you paid for it? Apparently not. According to the Revenue website the ‘value’ on which taxes and duties are levied includes any local taxes you paid in the country of origin plus shipping and insurance charges. Presumably this is to avoid fraud where suppliers charge enormous sums for shipping and little to nothing for the product. It does seem unfair to honest purchasers though, particularly as shipping costs for individual items may be significant.

Import duty

When items are imported into the UK from outside the EU import duty may be payable. Brexit may affect this of course as imports from the EU may also attract import duty if there is no free trade agreement. The amount of duty payable depends on the type of product being imported and may even vary depending on the products features. Currently no import duty is charged for items costing £135 or less. NB There is no longer a waiver if the duty is less than £9.

For gifts there is a flat rate duty of 2.5% if worth more than £135 and less than £630, unless the item/s being imported are normally charged duty at a lower rate.

In a few circumstances, including if the value is over £873 “or it is for a particular customs regime (including all special procedures) “, you will be sent a customs form to fill in and return before being told how much to pay.

You may be able to get an idea of the amount of duty likely to be levied on a particular item by ringing the VAT, Customs and Excise helpline, 0300 200 3700 or by web chat here.

VAT

Import VAT is not charged on item costing £15 or less unless the item is alcohol, tobacco, perfume or toilet water. Gifts you are sent of up to £39 in value are also free from VAT. Otherwise VAT will be charged at the regular rate (currently 20%) on both the cost of the item and on any duty payable.

Gifts of alcohol, perfume & tobacco

There are complex rules over gifts of alcohol etc. as these may be subject to Excise Duty. See section 2.5 onwards of this HM Revenue & Customs web page for details.

Parcelforce handling charge

If you item is shipped via the mail, rather than international courier, Parcelforce charge an administration fee. This is £11.25 for smaller items but is £25 for goods worth over £873. There are additional charges of £5.50 a week if the item has to be held for longer than 10 days. See the Parcelforce website for more details.

The bureaucracy

Unfortunately the process for items subject to charge can be unwieldy and slow. An item taking two days to arrive in the UK will then be processed at the Royal Mail International Hub where the HMRC Border Force will assess the duty due. This appears to be a slow (and expensive) process which will add many days if not weeks of delay. Once the charges are assessed you will be sent a letter giving you a Customs Charge reference number, telling you how much to pay and how to pay it. Note that the reference number is different to any tracking reference.

You can pay online by entering the item’s Customs Charge reference number. If you are using Parcelforce online tracking to check on your item’s glacial progress, and may be able to see that a charge is payable but you may not be able to find out online what the reference number is or how much to pay. You really may have to wait for snail mail to bring the information to you.

How to avoid some of the charges and processing delays

Some traders in the Channel Islands, Hong Kong, Singapore, and New Zealand are registered with Customs and Excise to collect duty and VAT before shipping. In this case there are no additional Parcelforce handling charges. Before paying for purchases it may be worth checking whether it is possible to pre-pay the duty. NB Note that online trading platforms such as Ebay and Amazon may not have a mechanism to allow this. Payments made outside their systems will almost certainly not be covered by their consumer protection arrangements.

An example purchase

An electronic item costing £55 including shipping was purchased from a Chinese supplier via Ebay.

Shipping to the UK took two days.

There was a delay of 7 days before the item was shown as being at the delivery depot ‘awaiting payment of charges’.

There was a further one day delay before the Custom Charge letter arrived. Fortunately this was sent first class. Payment was made online immediately on receipt of the letter with delivery scheduled for three days later.

Charges on the item were £9.82 import VAT and the then clearance fee of £8. The good news is that the clearance fee was zero rated for VAT purposes, so the total payable was £17.82 – roughly a third extra.

Summary

The rules applying to imported goods are less than transparent and depend to some extent on what has been written on the customs form by the person sending your purchase. Virtually any item worth up to £15 will be quick and easy to import but if any duty or VAT are payable the process can be slow and painful. The tax and fees will increase the cost of a £16 item by 70%. A few traders in a few countries have agreements for pre-payment of duty and VAT but online trading platforms could do wonders for international trade if they could find a way for more sellers to pre-pay the Customs charges. The definitive sources of information on current charges and the process involved are HMRC and Royal Mail. Guidance at the HMRC website is up to date. Unfortunately the websites of Parcelforce and its owner Royal Mail currently disagree about the fees payable.