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bigduckontax, Accountant
Category: Tax
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We are beekeepers from Croatia and would like to sell honey

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We are beekeepers from Croatia and would like to sell honey to UK customers through Internet. The tax for honey in Croatia is 25%, while the tax for honey in UK is 0%. Does that man that we should definitely get UK VAT identification number and be able to sell honey with 0% VAT. The products would be sent from the rented storage in UK. Thank you!
Hello, I'm Keith and happy to help you with your question.

You are correct that the sale of honey in the UK is a zero rated supply. However, on importing honey to the UK, there is an import duty of 12.8% plus a VAT charge of 20%. The import duty you would have to bear and recover through your selling price. The VAT can be reclaimed if you register your UK activities for VAT. As you are making exclusively zero rated supplies you should have no difficulty in registering, the VAT administrators are well aware of the necessity for such suppliers to be registered even if their turnover is below the GBP 79K of annual turnover which triggers compulsory registration for the tax. They will even allow you to make returns monthly instead of the usual quarterly to ease your cash flow position. There will presumably be VAT on your storage charges and maybe other items which you can reclaim also.

I do hope I have helped you with your problem. VAT can be quite complex, in your case though relatively simple.

Customer: replied 4 years ago.

Thank you so much for the answer. I do have one further question though. Since Croatia is in the EU (like UK), shouldn't that mean that we have no import duty, as the honey is not going through customs or any other paperwork. As far as we know, we just need to have certificate of the honey quality (which we already do - it is made in Croatia and accepted anywhere in EU as far as we were informed), proper labeling and consignation paper when transporting it to UK.

I am still a bit confused about 12.8% import duty and 20% VAT charge. I apologize for that, we are just beekeepers and taxes can be quite overwhelming to us.

According to the HMRC web site this is the duty for importing honey from Croatia, it being classed as Food and Drinks - Sweets Snacks Confectionery - Jelly (Jello) desert [code 2106.90.9260]. However there are literally thousands of import duties and it might well be that there are other classifications under which your imports are being recorded. You will soon know, HMRC will not release the imports at port of entry until duty, if any, has been paid!

However, my advice to voluntarily register for VAT still holds. You make zero rated supplies when you sell honey in the UK so any VAT input tax you pay on say storage, administration or distribution charges is still recoverable even if none is being imposed on import.
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Thank you for your excellent support.