How to Reclaim VAT in the UK After Shipping from China: A Complete Guide

CNXtrans
Sep 19
6 min read

Shipping goods from China to the UK has become an integral part of global trade for many UK-based businesses. From consumer electronics and apparel to industrial equipment and raw materials, UK companies regularly import from Chinese suppliers to stay competitive in both price and variety.

However, one common issue that businesses face is import VAT. Paying VAT on imports is unavoidable, but the good news is that UK businesses can usually reclaim this VAT. The key lies in understanding how the import process works, ensuring the correct shipping terms are used, and keeping the right paperwork.

This guide provides a detailed explanation of how UK businesses can reclaim import VAT after shipping goods from China to the UK, the role of DDU (Delivered Duty Unpaid) shipping, and why working with a reliable freight forwarder such as CNXtrans is crucial.

1. What Is Import VAT and Why Does It Matter?

When goods are imported into the UK from outside the UK, import VAT is payable at the border. It is usually calculated on the CIF value (Cost, Insurance, Freight), plus any customs duties and additional charges.

For businesses, import VAT can represent a significant upfront cost. The good news is that if your business is registered for VAT in the UK, this import VAT is usually recoverable as input tax, just like domestic VAT charged on UK purchases.

But to reclaim it successfully, certain conditions must be met:

Your business must be the importer of record.
You must hold valid customs documentation (such as the import entry and commercial invoice).
The goods must be used for business purposes that qualify for input VAT recovery.

2. DDU vs DDP Shipping — Why It Makes All the Difference

One of the most important aspects of reclaiming import VAT lies in the shipping terms. Two commonly used terms are DDP (Delivered Duty Paid) and DDU (Delivered Duty Unpaid).

DDP (Delivered Duty Paid):Under DDP, the seller (exporter) handles customs clearance in the destination country and pays any import duties and VAT. This might sound convenient, but it creates a major problem for VAT reclaim. Since the seller/importer pays VAT in their own name, your UK business is not the importer of record and therefore cannot reclaim that VAT.
DDU (Delivered Duty Unpaid):Under DDU, the seller arranges transportation up to the UK, but the buyer (you) is responsible for import duties and VAT. This means the import declaration is made in your company’s name, and you are legally recognized as the importer. Because of this, you can reclaim the VAT once it has been paid or accounted for.

Key takeaway: If your business wants to reclaim VAT on shipments from China, you must ensure shipments are done on a DDU basis rather than DDP.

3. The Legal Requirement for Reclaiming Import VAT

According to HMRC rules, import VAT can only be reclaimed by the business that is named as the importer of record. This business must:

Be VAT registered in the UK.
Hold a valid UK EORI number (Economic Operator Registration and Identification).
Be able to demonstrate that the goods were imported for taxable business activities.

If your supplier or forwarder imports the goods in their own name (as happens under DDP), your company loses the right to reclaim VAT. This is why DDU shipping terms are crucial.

4. Methods of Accounting for Import VAT

There are two main ways UK businesses can deal with import VAT once a shipment from China has arrived.

a) Postponed Import VAT Accounting (PVA)

Postponed import VAT accounting allows businesses to declare import VAT on their VAT Return instead of paying it immediately at the border. This method:

Improves cash flow because you don’t need to pay VAT upfront.
Shows import VAT on your monthly postponed VAT statement.
Lets you declare and reclaim VAT in the same return (subject to normal VAT rules).

b) Pay at the Border and Reclaim Later

Alternatively, you can pay import VAT at the time of import (often through a courier or forwarder) and then reclaim it on your next VAT Return. To do this, you’ll need to keep:

Import declaration documents (Entry Acceptance, MRN).
Proof of VAT payment.
A commercial invoice and bill of lading/air waybill.

Both methods are valid, but PVA has become the preferred option for many UK businesses as it avoids the cash flow disruption of paying VAT upfront.

5. Step-by-Step Process for Reclaiming Import VAT from China Shipments

Here’s a step-by-step breakdown of how to ensure your business can reclaim VAT on shipments from China.

Step 1: Use the Correct Shipping Terms

Make sure the goods are shipped on a DDU basis (sometimes also referred to as DAP – Delivered at Place). This ensures the import declaration is made in your company’s name.

Step 2: Provide Your EORI and VAT Registration Number

Give your freight forwarder or courier your UK EORI and VAT number so they can use them in the import declaration.

Step 3: Customs Clearance

When the shipment arrives, customs clearance must be done under your business name. Duties and VAT will either be paid at the border or postponed through PVA.

Step 4: Obtain Documentation

Keep copies of:

The commercial invoice from your supplier.
The customs import declaration (showing your business as importer).
The postponed VAT statement (if using PVA) or proof of VAT payment.

Step 5: Reclaim VAT

On your next VAT Return, record the import VAT as input tax. If using PVA, this will be taken from your postponed VAT statement.

6. Common Mistakes Businesses Make

Many businesses importing from China run into problems because of misunderstandings around VAT recovery. Common mistakes include:

Using DDP shipments unknowingly. Many suppliers in China arrange DDP because it seems easier for the buyer. But this prevents the buyer from reclaiming VAT in the UK.
Not providing EORI numbers. Without your EORI number, customs cannot process the shipment under your business name.
Poor record-keeping. HMRC requires evidence of import VAT. If you don’t have customs documentation, your reclaim may be denied.
Not using PVA when eligible. This results in unnecessary cash flow strain.

Avoiding these pitfalls can save significant time, money, and stress.

7. Why Choosing the Right Freight Forwarder Matters

The reclaim process depends heavily on whether your shipment is handled correctly at the point of customs clearance. The freight forwarder plays a central role here.

A good forwarder should:

Offer door-to-door DDU service.
Ensure customs clearance is done in the consignee’s name.
Provide accurate and timely documentation.
Advise you on whether to use PVA or pay VAT upfront.

8. Why CNXtrans Is the Ideal Freight Forwarder for UK Businesses

When it comes to shipping from China to the UK on a DDU basis, CNXtrans is a strong choice for businesses that want to reclaim VAT.

Here’s why:

Specialization in China–UK shipping: CNXtrans has extensive experience consolidating and shipping goods from suppliers in China to businesses in the UK.
Door-to-door DDU service: They handle the entire process, from supplier pickup in China to final delivery in the UK, ensuring your company is always the importer of record.
Customs clearance in your business name: This is critical — CNXtrans ensures your shipments clear customs using your company’s details, making VAT reclaims possible.
Flexibility across air and sea freight: Whether you need fast delivery via air courier or cost-effective sea freight, CNXtrans can arrange DDU shipments accordingly.
End-to-end visibility and documentation: With CNXtrans, you’ll receive the necessary customs paperwork and declarations, which are essential for VAT recovery.

By using CNXtrans, UK businesses can confidently import from China knowing they will be able to reclaim VAT afterwards, improving cash flow and profitability.

9. Practical Example

Imagine a UK-based electronics retailer ordering £50,000 worth of goods from Shenzhen.

If the supplier ships DDP, the supplier pays UK import VAT of 20% (£10,000) in their own name. The retailer cannot reclaim this VAT because they are not the importer of record.
If the retailer uses CNXtrans to ship on a DDU basis, the import declaration is filed under the retailer’s EORI. The £10,000 VAT is accounted for using PVA on the retailer’s VAT Return, and immediately reclaimed as input VAT. The net effect is no cash loss to the retailer.

This example highlights why the shipping method and forwarder selection are so important.

10. Final Thoughts

Reclaiming VAT on imports from China is entirely possible — but only if shipments are structured correctly. UK businesses must ensure that:

Shipments are done on a DDU basis (not DDP).
Customs clearance is completed under the consignee’s business name.
Correct documentation is kept for HMRC.
Postponed Import VAT Accounting (PVA) is used where possible to improve cash flow.

Choosing the right freight forwarder makes all the difference. CNXtrans provides door-to-door DDU shipping from China to the UK, ensuring that businesses can reclaim VAT once the shipment has been completed. With their expertise, UK companies can streamline imports, stay compliant with customs regulations, and maximize VAT recovery.

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