Michael

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?