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Costs of imported goods

Forum|Forum|6 years ago
April 15, 2020
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Hello,

We import goods into UK and pay our supplier in USD. But we pay shippers and import duties and VAT in GBP.

How do I:

1) Add a cost of goods in USD? I.e. amount per unit that I have paid to the supplier.

2) Process the following payments:

2.1. Import duty paid on goods - do I have to link it to goods somehow or does it just go into some expense account? Also - some of our goods have zero import duty.

2.2. Import VAT - I have found out how to process invoices and payments for it - but again - do I have to link it to goods somehow?

2.3. Deferment fee - a fee charged by shipping company for us using their account with HMRC customs service - sort of a surcharge for acting as our intermediate. How do I process & categorize it?

QuickBooks Online

Best answer by paul72

https://www.gov.uk/guidance/vat-imports-acquisitions-and-purchases-from-abroad would be worth reading.

(1) Add supplier's invoice as you would a UK supplier but use a zero-rated VAT code. I have created an Import/Export code but Z=0% or Exempt will be OK.

Others may tell you to use NoVAT (= Outside the Scope of VAT) but this will mean that the purchase is not shown on the VAT return.

(Goods purchased from outside the EU are only Outside the Scope of VAT while they remain outside the EU.)

(1a) Value here depends on whether you have Multi-Currency enabled. If so, enter value in USD. If not, enter calculated cost in GBP.

(2:1) You will probably have received an invoice from the clearing company. Enter this as you would a normal invoice. The Duty is an Expense so I usually enter in the same account/category as the related goods (i.e. Cost of Goods Sold or the Expense Account).

Duty is not reclaimable, so no need to get too deep into the technicalities or to itemise the percentages unless you want to.

I don't think there is a way to specifically link this expense to the goods purchased - again, no need to go too deep, other than for your own information (maybe add a memo?).

(2:2) Import VAT can be paid to the clearing company (using their deferment account) or paid direct to HMRC FAS.

If paid to the clearing company it will be shown on their invoice - enter as a 100% VAT transaction as you have found out. You will also get a C79 form from HMRC next month - make sure you keep this for your records.

If paid direct to HMRC, the C79 is your 'invoice'. Enter into QBO as a 100% VAT transaction to reclaim the VAT.

(2:3) The deferment fee is similar to the duty paid - an expense. Up to you how you account for it - as a service charge, an add-on to the shipping costs, or as a Cost of Goods.

I find that some companies make this fee VATable & some non-VATable ... right or wrong, I don't know but check your invoice & use appropriate VAT code when entering into QBO.

Hope this helps.

paul72Answer

https://www.gov.uk/guidance/vat-imports-acquisitions-and-purchases-from-abroad would be worth reading.

(1) Add supplier's invoice as you would a UK supplier but use a zero-rated VAT code. I have created an Import/Export code but Z=0% or Exempt will be OK.

Others may tell you to use NoVAT (= Outside the Scope of VAT) but this will mean that the purchase is not shown on the VAT return.

(Goods purchased from outside the EU are only Outside the Scope of VAT while they remain outside the EU.)

(1a) Value here depends on whether you have Multi-Currency enabled. If so, enter value in USD. If not, enter calculated cost in GBP.

(2:1) You will probably have received an invoice from the clearing company. Enter this as you would a normal invoice. The Duty is an Expense so I usually enter in the same account/category as the related goods (i.e. Cost of Goods Sold or the Expense Account).

Duty is not reclaimable, so no need to get too deep into the technicalities or to itemise the percentages unless you want to.

I don't think there is a way to specifically link this expense to the goods purchased - again, no need to go too deep, other than for your own information (maybe add a memo?).

(2:2) Import VAT can be paid to the clearing company (using their deferment account) or paid direct to HMRC FAS.

If paid to the clearing company it will be shown on their invoice - enter as a 100% VAT transaction as you have found out. You will also get a C79 form from HMRC next month - make sure you keep this for your records.

If paid direct to HMRC, the C79 is your 'invoice'. Enter into QBO as a 100% VAT transaction to reclaim the VAT.

(2:3) The deferment fee is similar to the duty paid - an expense. Up to you how you account for it - as a service charge, an add-on to the shipping costs, or as a Cost of Goods.

I find that some companies make this fee VATable & some non-VATable ... right or wrong, I don't know but check your invoice & use appropriate VAT code when entering into QBO.

Hope this helps.

SGIAuthor

Paul72,

Thank you for the information.

Mind if I ask a bit more details?

I have single invoice from clearing company which includes Import Duty, Import VAT and Deferment Fee and it was paid by a single bank transfer against invoice. Do I understand correctly that I have to split this Transactions into 3 parts?

Also - where do I put Import Duty, Import VAT, Deferment charge and costs of shipping goods in Accounts - in Costs of Sales or in Purchases?

@SGI wrote:
Paul72,

Thank you for the information.
Mind if I ask a bit more details?

I have single invoice from clearing company which includes Import Duty, Import VAT and Deferment Fee and it was paid by a single bank transfer against invoice. Do I understand correctly that I have to split this Transactions into 3 parts?

If you have pulled the transaction from a Bank Feed then, yes, I would add split lines - for clarity, if nothing else. Personally, I don't use Bank Feeds - too blunt for things like this.

I still prefer to enter Bills & Pay Bills.

For this I'd have one line each for the shipping & deferment fees (because the VAT treatment for these might be different - as mentioned above) plus two lines to create the 100% VAT element...

+ value (standard rate VAT)

- value (zero rate VAT)

(again, separating this out is my personal preference - you could adjust the VAT value manually as per QB's method).

Also - where do I put Import Duty, Import VAT, Deferment charge and costs of shipping goods in Accounts - in Costs of Sales or in Purchases?

That's really up to how you want to classify them.

If the goods are for resale, I'd probably enter the shipping, duty & deferment fee as a Cost of Goods Sold - so you have an idea of total cost of the goods you've sold.

If the goods are for company use, they could be in Purchases.

If you prefer to account for Shipping separately, that could have it's own account ... etc, etc.

Hope this helps.