Changes to Customs Treatment of Buying Commissions

29 July 2011

The customs valuation rules allows importers to exclude buying commissions from the customs value provided certain conditions are met.

Conversely, selling commissions may need to be added to the customs value highlighting the importance in determining the correct type of agency relationship and drafting appropriate supporting contracts.

Buying commissions are however subject to VAT, even where the agent provides his services to you from overseas. . HMRC issued an information paperĀ  (CIP (11)59) on 14 July updating its position on for imports.

Up to 1 January 2010 the VAT on buying commissions was to be accounted for by making an adjustment to the import VAT value on the customs declaration and a failure to do this could have resulted in penalties, collection of underpaid VAT (which could subsequently be recovered) and interest. From 1 January 2010 this import VAT should be accounted for on your VAT return using the reverse charge mechanism.

If you are purchasing from an intermediary or through an agent then there may be ways to reduce your customs duty cost or risks of HMRC challenges to your valuation of goods. If you would like to explore this matter further then please call us.

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