Customs Duty vs Import VAT on FBA Stock: What's Reclaimable

You've shipped a pallet of stock to an Amazon fulfilment centre, and the freight agent's invoice lands with two separate charges on it: customs duty and import VAT. They look similar. They are not. One of them you can almost always get back. The other is usually gone for good, sitting in your cost of goods whether you like it or not.

Mixing the two up is one of the most expensive mistakes we see Amazon sellers make. Some try to reclaim duty as if it were VAT and get it knocked back. Others quietly absorb import VAT they were entitled to recover, month after month.

This guide explains the difference in plain terms, shows you exactly which charge is reclaimable and how, and walks through the VAT return boxes with a worked example. It's written for UK and overseas sellers sending goods into Amazon FBA.

What's the difference between customs duty and import VAT? {#difference}

In short: customs duty is a cost of bringing goods into the UK, and you can't reclaim it. Import VAT is a tax you pay on the value of those goods at the border, and if you're VAT registered and the goods are for your business, you can normally recover it in full.

They're charged at the same moment, on the same shipment, often by the same freight agent. That's why they get confused. But they behave completely differently for tax.

Customs duty is a levy on imported goods. The rate depends on what the product is (its commodity code) and where it was made (its origin). It's charged on the value of the goods, including freight and insurance to the UK border. Once paid, duty is a permanent cost. It is not a tax you can offset against anything.

Import VAT is simply VAT charged at the border instead of at a UK till. It's charged on the goods plus the shipping, insurance and any customs duty already added. The crucial point: because it's VAT, a VAT-registered business can usually reclaim it as input tax, exactly like the VAT on a UK supplier invoice.

HMRC is explicit that the two are not interchangeable. Its guidance on completing your VAT return states that customs duties "are not treated as VAT" and that you "must not include import VAT" in any adjustment you make for over or underpaid duty (gov.uk, Completing your VAT Return to account for import VAT).

Here's the distinction at a glance.

The VAT standard rate of 20% is confirmed by HMRC (gov.uk, VAT rates).

Is customs duty reclaimable on FBA stock? {#duty-reclaimable}

No. Customs duty you correctly pay on stock entering the UK is not reclaimable as VAT or anything else. It's a cost of getting the goods to market, so it belongs in your cost of goods sold and ultimately reduces your taxable profit, but you never get the cash back.

That makes duty something to plan around rather than recover. The rate is driven by the product's commodity code and its country of origin, which you look up using the UK's online Trade Tariff. Getting the code right matters, because an incorrect classification can mean you overpay (a cost you can't claw back through VAT) or underpay (which HMRC can later assess, with interest).

There's one narrow situation where duty money comes back: if you paid it in error or overpaid it. That's a repayment claim, not a reclaim through your VAT return, and we cover it further down.

A quick note on the threshold. Customs duty is generally only charged where a consignment is worth more than £135, although excise goods such as alcohol and tobacco attract charges at any value (gov.uk, Tax and customs for goods sent from abroad). For most FBA sellers shipping a pallet or container of stock, you're comfortably over £135, so duty applies in the normal way.

Is import VAT reclaimable, and how? {#import-vat-reclaimable}

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Yes, in most cases. If you're registered for UK VAT and the imported goods are for use in your business, you can recover the import VAT as input tax under the normal rules.

The condition that trips sellers up is ownership. HMRC says the goods must be "for use in your business and you have the right to dispose of them (usually as the owner)" (gov.uk, Check when you can account for import VAT on your VAT Return). In an FBA context this means you, the seller, need to be the importer of record, with your own VAT number and EORI number on the import declaration. If your stock arrives under someone else's name (a forwarder's, say, or Amazon's), you can lose the right to recover the VAT, because it wasn't your import.

You need an EORI number to make customs declarations and bring goods into Great Britain in the first place (gov.uk, Get an EORI number). For a VAT-registered business this is linked to your VAT registration, and it's what import VAT gets recorded against.

There are two routes to recovering import VAT:

1. Postponed VAT accounting (PVA) declare and reclaim the VAT on the same return, with no cash leaving your account at the border. This is the default for most sellers and the one we recommend looking at first.
2. Pay at the border and reclaim using a C79 the older route, where the freight agent pays the import VAT and you recover it later using HMRC's monthly C79 certificate as evidence.

Both routes recover the same VAT. The difference is cash flow. PVA keeps the money in your business; the C79 route ties it up until your next return.

How does postponed VAT accounting work for FBA imports? {#pva}

Postponed VAT accounting lets a UK VAT-registered business account for import VAT on its VAT return instead of paying it upfront at the border. You declare the VAT as if it were due (output tax) and reclaim it as input tax on the same return, so for a fully taxable business the net cash effect is nil.

It works as a reverse-charge style entry. No approval is needed in advance: you simply choose to use PVA on your import declaration by quoting your VAT number and EORI (gov.uk, Check when you can account for import VAT on your VAT Return).

The evidence for your figures is your monthly postponed import VAT statement, which you download from the Customs Declaration Service. Statements are usually available by the 10th working day of the month, and you can only access each one for 6 months from publication, so download and keep them (gov.uk, Get your postponed import VAT statement).

For most FBA sellers, PVA is the better choice. It removes a chunk of working capital from being parked with HMRC between the import and your VAT return, which on regular container shipments adds up fast.

Which VAT return boxes do I use? {#vat-boxes}

HMRC's instructions for PVA are specific. You take the figures from your monthly postponed import VAT statement and enter them as follows (gov.uk, Complete your VAT Return to account for import VAT):

For a fully taxable business, the Box 1 and Box 4 entries are equal and cancel out, so the import VAT has no net cash cost. Box 7 records the value of the goods only.

Notice what isn't here: customs duty. Duty never goes through these boxes. If you ever need to correct an over or underpayment of duty, you handle that through customs procedures, not your VAT return, and you must keep import VAT out of that adjustment entirely (gov.uk, Complete your VAT Return to account for import VAT).

Worked example: a £10,000 shipment into FBA {#worked-example}

Illustrative example. Priya runs a UK limited company selling homeware through Amazon FBA. She's VAT registered, holds her own EORI, and is the importer of record on her shipments. She brings in a container of stock with a customs value of £10,000 at the border (goods plus freight and insurance to the UK). Her products carry a customs duty rate of 4% (illustrative, taken from the Trade Tariff for her commodity code), and import VAT is at the standard 20% for 2025/26.

Here's how the charges build up:

So Priya faces £400 of duty and £2,080 of import VAT.

What she can recover. Using postponed VAT accounting, Priya puts £2,080 in Box 1 and £2,080 in Box 4 of the VAT return covering the import. They cancel, so the £2,080 of import VAT costs her nothing in net terms. She also records the £10,000 goods value in Box 7.

What she can't recover. The £400 of customs duty is gone. It's a real cost that goes into her cost of goods sold, so her landed cost per unit needs to carry it.

The bottom line. Of the £2,480 in border charges, £2,080 (84%) is fully recoverable and £400 (16%) is a permanent cost. If Priya had wrongly treated the whole £2,480 as reclaimable VAT, she'd have over-claimed £400, an error HMRC would expect her to correct.

For the duty side, a simple journal records £400 to cost of goods (or a duty expense account); there's no VAT to split out, because duty isn't VAT. For the import VAT under PVA, the entry is a £2,080 debit to VAT input and a £2,080 credit to VAT output, leaving the profit and loss account untouched.

If you'd like to sanity-check the wider tax picture on your selling profits, our self-employed and small business calculators can help you model the numbers, and our Amazon FBA accounting service handles the import VAT mechanics end to end.

What about the £135 rule and the marketplace VAT charge? {#threshold-omp}

This is where FBA sellers get genuinely confused, because there are two completely different VAT events: VAT at the border (what this guide is about) and VAT on the sale to the customer. They're separate, and which one applies depends on where your goods are when you sell them.

If goods sit in a UK fulfilment centre when a customer buys them, the £135 import threshold is irrelevant to that sale. The threshold only matters for low-value consignments sent from overseas directly to a customer. For an overseas seller whose goods are already in the UK at the point of sale, HMRC requires VAT to be accounted for on those sales regardless of value (gov.uk, VAT and overseas goods sold directly to customers in the UK).

Where an online marketplace is involved, the marketplace itself can become liable to account for the VAT on the sale. For goods owned by an overseas seller and located in the UK at the point of sale, HMRC's guidance is that the online marketplace is liable to account for the VAT on those sales (gov.uk, VAT and overseas goods sold to customers in the UK using online marketplaces).

Here's the catch that protects your import VAT recovery: even when Amazon accounts for the sale VAT as a deemed supply, an overseas seller who is registered for VAT can still reclaim the import VAT paid when the goods entered the UK, under the normal input tax rules (gov.uk, VAT and overseas goods sold to customers in the UK using online marketplaces). In other words, staying VAT registered is exactly what lets an overseas FBA seller recover border VAT, even if Amazon handles the sale VAT.

The practical takeaway: don't let the marketplace rules talk you out of VAT registration, because registration is the mechanism that makes your import VAT reclaimable.

What if I overpaid customs duty or import VAT? {#overpaid}

If you paid too much duty or import VAT, for example because of a wrong commodity code or a clerical error, you can claim it back, but through a repayment process rather than your normal return.

HMRC's time limits are: 3 years for overpayments, 1 year for rejected imports, and 90 days for withdrawal of an import declaration (gov.uk, How to apply for a repayment of import duty and VAT).

For a VAT-registered importer, HMRC's instruction for overpaid import VAT is to make the adjustment through your VAT return by reducing the output tax in Box 1, rather than submitting a separate VAT claim. Overpaid duty follows the customs repayment route (form C285 if you don't hold an EORI, otherwise through the customs system), and HMRC aims to decide within 30 days (gov.uk, How to apply for a repayment of import duty and VAT).

The lesson here is the same one that runs through this whole topic: keep duty and VAT in separate lanes. They have different recovery routes, different evidence and different deadlines.

Frequently asked questions {#faqs}

Can I reclaim customs duty on goods I send to Amazon FBA?

No. Customs duty is a permanent cost that goes into your cost of goods sold. The only time duty comes back is if you overpaid it, which is handled through a separate customs repayment claim, not your VAT return.

Is import VAT reclaimable for an Amazon FBA seller?

Yes, if you're UK VAT registered and you're the importer of record for the goods, with your own VAT number and EORI on the import declaration. The goods must be for use in your business and you must have the right to dispose of them, usually as the owner.

What's the difference between customs duty and import VAT?

Customs duty is a levy on imported goods, based on the product type and origin, and it can't be reclaimed. Import VAT is VAT charged at the border on the goods plus shipping plus any duty, currently at 20%, and a VAT-registered business can normally recover it in full.

How does postponed VAT accounting help FBA sellers?

It lets you declare and reclaim import VAT on the same VAT return instead of paying it at the border. You enter the VAT in Box 1 and Box 4, which cancel out for a fully taxable business, so the import VAT costs nothing in net cash terms and stays in your working capital.

Which VAT return boxes do I use for postponed VAT accounting?

Box 1 for the import VAT due, Box 4 for the import VAT reclaimed, and Box 7 for the total value of imported goods excluding VAT. You take the figures from your monthly postponed import VAT statement. Customs duty never goes through these boxes.

Does the £135 rule mean I don't pay import VAT on FBA stock?

Usually not. The £135 threshold applies to low-value consignments sent from overseas directly to a customer. A pallet or container of stock going into a UK fulfilment centre is normally well above £135, so import VAT and any duty apply in the normal way.

A final word

Customs duty and import VAT arrive together but go their separate ways. Duty is a cost to plan into your pricing. Import VAT, handled properly through postponed VAT accounting and the right boxes on your return, should cost a fully taxable seller nothing at all. Getting the import declaration in your own name and staying VAT registered are what protect that recovery.

If you want this running cleanly every month, with PVA statements reconciled and your VAT returns filed without the guesswork, talk to us. Book a free 20-minute call with a Zmartly accountant through our Amazon FBA accounting service and we'll handle the import VAT mechanics for you.

Sources {#sources}

• gov.uk, Complete your VAT Return to account for import VAT
• gov.uk, Check when you can account for import VAT on your VAT Return
• gov.uk, Get your postponed import VAT statement
• gov.uk, Tax and customs for goods sent from abroad
• gov.uk, Get an EORI number
• gov.uk, VAT rates
• gov.uk, VAT and overseas goods sold directly to customers in the UK
• gov.uk, VAT and overseas goods sold to customers in the UK using online marketplaces
• gov.uk, How to apply for a repayment of import duty and VAT