What is a bonded warehouse?

An area that is secure is a bonded warehouse, where items subject to import duty and VAT are kept. These items’ VAT and customs duty payments are postponed until they are sold or removed from the bonded warehouse.

Sellers who import or sell products subject to these fees can benefit from storing goods in this fashion in a number of ways. Because of this, vendors of alcohol, food, tobacco, and spirits frequently use bonded warehouses.

Businesses should be aware that the laws and processes may vary from those in the UK when delivering products into or withdrawing them from a tax warehouse in another EU member state.

Therefore, if there are any questions about the law, it is advised to approach the authorities in that member state.

Why are bonded warehouses used?

A bonded warehouse may be a preferable choice for importers and exporters of particular items for a variety of reasons. These consist of:

Deferred payments on these items ensure that no tax is paid until the things are sold, which can significantly increase a company’s cash flow.

This is frequently between 25% and 33% of the initial price of imported items.
If the products are intended for export, the duty will be paid in the country of destination rather than in the UK.

Due to the avoidance of double duty payments, further savings will result.
Prior to the busy season, merchandise can be imported and kept in bonded warehouses, ensuring prompt order fulfilment.

Bonded warehouses frequently include specialised equipment, including deep freezers or big vats to keep wine or spirits.
The HMRC bonded warehousing facility frequently offers customs documentation for both inbound and outbound shipments.

Trading in a tax warehouse

signing up for VAT
You don’t have to register for VAT if your primary commercial activity is the supply of goods within a tax warehousing framework, but you are allowed to do so freely under the VAT Act of 1994.

The value of deliveries of goods or services made in a tax warehouse has no bearing on your obligation to register for other business ventures.

the effects of VAT on storing items in a tax warehouse
When excisable items subject to a warehousing regime are stored in a bonded warehouse for such goods, VAT is not required to be paid.

When merchandise is taken from the warehouse for personal use, VAT may be owed. This tax is paid by the individual taking the merchandise (or the person responsible for paying the duty), along with any deferred duty.

Removals from tax warehouses are subject to VAT.
When the products are taken from the warehousing regime and used at home, VAT is due on the final delivery of goods in the warehouse and must be accounted for and paid (or deferred).

The amount of VAT owed typically relies on the place of origin of the products and whether any additional supplies happen while they are in the UK tax warehouse.