Receipts from import VAT, the tax paid on goods purchased from countries outside the European Union (EU), decreased by £878m (10.5%) in the first quarter of 2020, against the same quarter of the previous year.
At the same time, receipts from Home VAT, which includes tax paid on products brought into the UK from EU countries, fell 17% in the first three months of 2020, compared to the year before.
HM Revenue & Customs, which released the figures this morning, said March 2020 payments in particular were impacted by the government’s VAT deferral measures, introduced to help businesses during the COVID-19 crisis.
On March 20, the government announced that VAT payments could be deferred for a three-month period.
High street shutdown
From March 23, when the Prime Minister ordered a country-wide lockdown, consumer movements have been restricted and all but essential retail on the high street has shut down.
Rachel Stockton, director of special projects at the Institute of Export & International Trade, said “a decline of this magnitude is not unexpected” given the economic shutdown.
“People are not able to spend their money as freely as they previously could and by not being able to browse the stores, there is no impulse purchasing. Furloughed workers have less disposable income, others are not receiving any income at all.”
She added that goods coming from China to the UK had been delayed due to that country’s own lockdown.
“A lot of imported goods arriving are not being customs cleared, some due to financial reasons, others because documents have either not been sent by the supplier or the importer’s offices and warehouse are closed. Hence the clearing agent has no paperwork to customs-clear the goods.”
Stockton added that as “most companies have a VAT deferment account” the April figures for import VAT would “give a clearer picture” of COVID-19’s impact on VAT receipts from imported goods.
“Today’s figures from HMRC show the devastating impact the Covid-19 lockdown is having on UK businesses,” said Marco Forgione, director general of the Institute of Export & International Trade.
“The figures highlight the important role international trade is going to play in rebuilding the UK economy.”