Clarification on describing VAT status for importing an item VAT return

In short, my question is: when I import an item from overseas with duties unpaid, is the expense 0% VAT (exempt/zero-rated), or is it outwith the VAT system and should be documented as having "No VAT". Context: I am doing my first VAT return as a limited company, and I wanted to clarify how to record some transactions correctly. Suppose I import an item for £1000 - VAT is not charged on the invoice as it is delivered duties unpaid. Upon arrival in the UK, I pay: - 20% VAT (£200) - A handling fee to the courier of, say £10 In my accounting software, I have the options to mark expenses as either "No VAT" or VAT at a given rate (e.g. 0% exempt, 0% zero-rated, 20% sales VAT). At the moment, I am marking the £1000 for the actual item and the handling fee as "No VAT". The £200 is correctly marked as VAT. I notice that on the VAT return, anything marked "No VAT" is fully excluded; it is not excluded in Box 7 "Net value of purchases". As such, if this semi-hypothetical transaction was the only transaction this quarter, Box 4 would be £200, Box 5 would be -£200, and all other boxes would be 0. Is this correct, or should I be recording the £1000 as VAT exempt/zero-rated to ensure it is counted in Box 7?

From an accounting perspective, I'd recommend treating the purchase as zero rated, as you have stated, if you code to "No VAT" then the net £1,000 doesn't hit the VAT return at all and that will look very odd to HMRC when they see you reclaiming £200 input tax but with no net purchase associated with it in Box 7, whereas if you code to zero, then the net £1000 goes to box 7, the £200 in Box 4 and that looks correct. I'd suggest treating as zero rated instead of exempt as exempt means something very different, also, don't forget in your imaginary scenario that you can only reclaim the £200 VAT when you hold a C79 certificate (ie, you can't reclaim the VAT from just the invoice from the courier/freight agent), to access the C79 certificate you need to register for Customs Declaration Service (CDS) and then you can access - link for info here https://www.gov.uk/guidance/get-your-import-vat-certificates Treating the import as zero rated is an accounting simplification, at the end of the day the VAT return will be correct (£200 in Box 4, £1,000 in Box 7), remains compliant with MTD, etc.

Hi,
Imported goods for use by your business should show in the VAT return in box 7 as they are a business purchase. The following guidance shows what should be included in each box of the VAT return:
How to fill in each box on your return
This would not be coded as VAT exempt as you have advised the goods were liable to import VAT. We would advise that you speak to your software provider about the best way to record the imports in their software package as you may be able to add the entry as a single purchase rather than separating the purchase of the goods and the import charges.
Thank you.