Tax position for a replacement under warrantee

Hello, I am a private individual that purchased an item from the EU on which I paid full import duties and VAT but which I subsequently realised was faulty. I therefore returned the item to manufacturer who determined that the fault could not be repaired and instead sent me a replacement under warrantee (i.e. there were no additional charges for the repair or the replacement item and I no longer own the original item since I sent it back). I am currently in a debate with DHL as to whether I owe VAT on the replacement based on the fact that they initially missed the fact that this was a replacement under warrantee and treated the item as if I had purchased it new. My reading of the rules is that a replacement under warrantee does not attract VAT (since to charge this would essentially mean I have been double taxed VAT since I paid it the first time around and, as I sent the faulty item back I am in no way in possession of anything but the original good that I bought). Having clarified with the manufacturer that they had made an error, DHL initially accepted this and released the goods to me but there accounts team have continued to insist I owe the VAT - please could someone help me with this as the rules are not 100% clear to me and it seems unbelievable to me that I owe VAT two times on essentially the same good (I could understand it attracting VAT if I had kept the faulty item and simply been sent a replacement but I returned it so there is no 'additional' good here to which additional VAT would attach). Thanks RH having a debate with DHL as to whether I owe VAT on that I purchased

Hi RH. When talking about imports, as a general principle every import is treated as a new import and will attract import VAT and customs duty on the total value of the goods. Unfortunately DHL nor HMRC cant just go on what’s written on an invoice or what you say with regard to the item being replaced. There are options to mitigate against this for faulty goods and there are a couple of options. 1 . Use the ‘rejected imports scheme to reclaim taxes paid on the original import ( usually this needs to be done prior to export of the faulty goods).or 2. Send the goods out under ‘outward processing for repair or replacement’ scheme. When the replacement goods are imported then they come back in duty and VAT free. You may have the option to use 1 retrospectively if you still have the proof of export.

Having called HMRC directly about this since I posted the question they have confirmed my assessment that I did not owe any duty on a replacement under warranty where the original item had been returned for repair was correct on the basis that: 1. I returned the original (faulty) item 2. I had already paid the full duty and VAT on the item when it was first imported 3. The 'replacement' item was in essence a repair since the fault on the original item was not one that could actually be repaired 4. As it was replaced under a warranty and there was no additional costs incurred there was nothing for and additional VAT to attach to.

Hi Robert Holford,

Please contact our Customs and International Trade Helpline on 0300 322 9434 who can help you with this.

Thank you. 

 

Hi HMRC Admin 25 Thanks, I did (when I realised this method would take a while) - their advice is posted above. Although I did miss something - they mentioned as a private individual (not a company) dealing in essentially low value goods the proof on the invoice (if it had been caught by DHL and which they admitted they missed) should have been sufficient. Thanks Robert