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Online retail is a rapidly growing sector within the UK economy and one in which (according to research by Superscript) more than a third of businesses are run as a part-time ‘side hustle’.
Whether you're a full-time ecommerce business owner or you sell online in your spare time, the process of acquiring your inventory and customers becomes somewhat more complex when those items cross international borders.
The process of importing products
Firstly, let’s look at the process of how to import stock for your online business from overseas.
Step 1: Get an EORI number
An Economic Operators Registration and Identification number (EORI number) is a code used for registering and identifying businesses that import or export goods.
You can apply for one online, and you’ll need to know it for customs declarations and supporting documentation.
If you import goods to England, Scotland or Wales, you’ll need an EORI number that starts with GB. And if your business moves goods to or from Northern Ireland, you may need one that starts with XI. For this reason, your business may end up with more than one EORI number.
Step 2: Decide who will deal with customs and transportation
Most businesses that import goods hire an individual or business to deal with customs and transportation (though you can choose to do this yourself) and HMRC has some useful information about hiring and working with a customs agent.
Step 3: Commodity codes
A commodity code is an internationally recognised reference code to help categorise imported and exported goods, and it will determine the rate of duty you need to pay and if you need an import licence. You’ll need to include the commodity code for each different product you bring into the country on your import declaration
The UK government has a useful tool to find the commodity code for each type of product you wish to import.
Step 4: Find out if you can reduce your Customs Duty
If the UK has a trade agreement with the country you’re importing goods from, you may be able to pay less or even no Customs Duty.
To take advantage of a trade agreement, you’ll need to make sure that your goods meet the ‘rules of origin’ (which means that you can prove they originated in the country you’re importing them from).
Step 5: Check if you need a licence or certificate
While the vast majority of online retailers can import products without licences or certificates, you may need one if you’re importing restricted items, such as:
- Animals and animal products
- Plants and plant products
- Hazardous chemicals
Step 6: Check the rules on marketing, labelling and marking
Wherever they’re manufactured, goods sold in the UK need to comply with certain standards for marketing, labelling and product markings. As an online retailer, it’s your responsibility to make sure that any products you import meet these standards.
Step 7: Get customs clearance
Let’s quickly jump back to step 2. If you hire someone to deal with customs and transportation, you can sit back and wait for them to complete this step for you. But if you do this yourself, you’ll need to:
- Arrange any relevant inspections
- Submit and manage an import declaration
- Pay any applicable VAT and duty
If you're importing alcohol or tobacco to sell online, these products are known as excise goods, and you'll have to pay special rates of excise duties to bring these goods into the UK market.
Step 8: Get a VAT refund
Most sellers need to pay VAT on any goods they import into the UK. And import VAT is usually set at 20%.
If you’re VAT-registered, you may be able to claim back any VAT you pay on the goods you import. To do this, you'll need your monthly import statements from HMRC, also called your C79 certificate.
Steffen Hoyemsvoll, Partner at Ecommerce Accountants, says:
Although it usually can be reclaimed by VAT-registered sellers, import VAT can create issues for cash flow – especially if there's a significant amount of time between importing your goods and completing your next VAT Return.
One way to address this is using postponed VAT accounting, which allows you to pay (and reclaim) your import VAT when you complete your VAT Return, rather than at the point of importing.
Step 9: Keep your records
All businesses need to keep thorough, complete records – including any invoices and customs paperwork from importing.
There are many online services and platforms to help with this, or you can develop your own system.
The process of exporting products
While many UK ecommerce businesses will only sell and deliver to customers within the UK itself, you may wish to offer delivery internationally – to Europe, the US and beyond. So, let’s look at the process for exporting products to customers overseas.
Step 1: Check the rules for exporting your goods
For all the products that you sell, you need to check the rules, both for exporting from the UK, and for importing to the country you're delivering to.
There are a number of products that you may need a licence or certificate to export from the UK, including:
- Animals and plants
- Drugs and medicines
- Medical devices
- Ozone-depleting substances and F-gases
- Works of art works and antiques
- Items that can have both civil and military uses
Step 2: Get your business ready to export
Just like with importing, in order to be ready to export your products, you’ll need to apply for an Economic Operators Registration and Identification (EORI) number.
Step 3: Decide who will make export declarations and transport the products
Whenever you export products abroad, you will need to make a Customs Declaration, and this can be done either by you as the business owner, or by someone you hire to deal with the customs paperwork.
If you chose to hire someone to take care of the paperwork, they will usually be one of three types of business:
- Freight forwarders
- Customs brokers
- Fast parcel operators
Each of these types of business can handle your products through the export process and fill in all the necessary paperwork.
Step 4: Classify your products
Before exporting any products to consumers abroad, you will need to classify the product type that is being exported by assigning it the correct commodity code, which can be found by using the UK government’s tool.
If you work with a third-party customs broker or fast parcel operator, they may be able to help in identifying the correct commodity code for your products.
Step 5: Prepare the invoice and other documentation for your goods
When you deliver any products to customers overseas, you must include a completed invoice and any licences or certificates with the products as they travel.
You may be able to charge your customers a VAT rate of 0% under certain circumstances. If you export to a country where your goods have a reduced or zero rate of duty, you will need to provide the product's proof of origin.
Step 6: Keep invoices and records
You should archive and keep customs paperwork and invoices related to international trade for 10 years, in case you are suited by HMRC.
If you're VAT registered, you must record the products sold in your VAT accounts, even if they were zero-rated and you did not charge VAT to your customers.
Delivering your products abroad by post
For online retailers, most of the products you export overseas will likely be exported through the postal service. There are certain Customs Declaration forms you need to complete, depending on the value of the item being posted abroad and the type of postal service being used:
Item value up to £270
|International tracked and signed
For items with a value above £270, you should use the CN23 for for all service types.
You're ready to get going
So, there you have it, a guide to the process of importing stock and exporting products to your customers. Whether you choose to do everything yourself or work with a customs broker, it’s important to ensure that you follow the steps outlined in this article so that your online retail business can thrive and stay on the right side of the rules.
You may also like:
- Key business dates for 2023
- Understanding taxes for your side hustle
- Cash accounting vs traditional accounting
Superscript's research around online businesses run as 'side hustles' is based on a survey of 682 online retailers conducted in November 2022 via Attest.
This content has been created for general information purposes and should not be taken as formal advice. Read our full disclaimer.
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