A: Although the VAT calculated on the import is effectively 5% this is still a Standard-Rate (currently 20%) item and so the client should declare VAT at the 20% rate on this UK sale.
In the future he could “opt” to use the margin scheme for imported items (that are eligible for reduced value VAT) by writing to HMRC Written Enquiries section. He should not claim the 5% import VAT but then ONLY account for 20% VAT on any positive margin achieved. Once notifying HMRC of taking up this option he will have to use the margin scheme for these type of imports for at least the following 2 years (and until cessation is notified to HMRC). See HMRC internal guidance at VATMARG07000.
These publications from Markel Tax were correct at the time of going to press and should be considered as principles-based guidance only. To check current validity, call the Markel Tax helpline. ICAEW (as distributor) disclaims all liability for any errors or omissions.
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