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UK VAT vs IEN Explained: Key Differences, Import Compliance & VAT Reclaims for E-Commerce Sellers
UK VAT vs IEN – What’s the Difference?
For businesses planning to expand into the UK, understanding the relationship between UK VAT registration and the UK Import Entry Number (IEN) is critical.
These two elements work together to ensure smooth UK customs clearance and accurate VAT reporting.
If you’re intending to reclaim VAT, it’s also crucial to ensuring that you get repaid the correct amount.
VAT vs IEN
Although UK VAT and IEN numbers are often discussed together, they serve very different functions within the UK VAT regime. Here, we’ve outlined the differences between the two, and how they function:
VAT (Value Added Tax)
A UK VAT registration number is a unique number assigned to businesses in the United Kingdom for tax identification purposes. It can be assigned to both UK and non-UK businesses.
For overseas businesses looking to expand into the UK, a VAT registration number is crucial for 1) storing inventory in the UK and 2) conducting taxable transactions with customers based in the UK.
Once registered, businesses have some key responsibilities, including:
- Collecting VAT from customers for taxable transactions
- Declaring the collected VAT to HMRC
- Remitting the appropriate amount of VAT to HMRC
Additionally, being registered for VAT also allows the business to reclaim VAT on eligible transactions.
This includes any upfront payment of import VAT (when importing inventory into the UK), or VAT paid for business-to-business transactions.
What about EORI?
An Economic Operators Registration and Identification (EORI) number is used in tandem with a VAT number in order to facilitate imports into the UK.
Businesses can activate an EORI linked to their VAT registration after successfully registering for VAT.
IEN (Import Entry Number)
The IEN is automatically generated by HMRC each time goods are cleared at the UK border. Each shipment with its own customs declaration is therefore assigned a unique IEN.
The IEN serves two purposes:
- It confirms that the appropriate customs duties and import VAT for that shipment have been paid
- It allows HMRC to track imports and cross-check them against the importer’s VAT returns
IENs are usually received by the logistics provider or customs agent handling customs clearance on behalf of the importing business.
Reclaiming import VAT
The IEN becomes crucial when it comes to submitting VAT returns with an import VAT reclaim.
Businesses who have paid import VAT in the process of importing inventory into the UK are eligible to reclaim this.
However, the amounts declared on their VAT return must match what is also linked to each individual IEN.
Here is how the process works in practice:
- Inventory arrives in the UK and the logistics provider declares it under the importer’s VAT and EORI number. Import VAT is paid at this stage (unless Postponed VAT Accounting is used).
- HMRC issues an IEN to the logistics provider which confirms record of the import.
- The importer files a VAT return, reclaiming the import VAT amount paid (if applicable).
- HMRC checks the claim against the IEN records. Only entries with valid IENs tied to the correct VAT number are accepted for deduction.
If there is no matching IEN, the import VAT cannot be reclaimed, leaving the seller with higher tax costs.
The importance of record-keeping
For ecommerce sellers, especially those using Amazon or other ecommerce platforms, failing to keep proper IEN records can create serious risks:
- Marketplaces may often request IEN details from sellers, particularly where they also provide warehousing solutions (e.g. Fulfilled by Amazon (FBA))
- Businesses may be asked to provide the relevant IEN(s) after filing a reclaim as part of a compliance check procedure
- Ongoing non-compliance could result in HMRC issuing financial penalties, or cancelling the VAT registration entirely
A common shipping mistake
A frequent mistake that many businesses make is using logistics providers who declare shipments under their own VAT and EORI registrations as part of a Delivery Duty Paid (DDP) or ‘tax-inclusive’ (or any other equivalent) service.
Whilst this may seem convenient at first, it can lead to a potential issue – the shipment IEN is permanently tied to the logistics provider, meaning that any import VAT paid cannot be reclaimed.
The logistics provider may pass on the upfront costs of the import VAT, but the owner of the inventory cannot reclaim this from HMRC.
The Customs Declaration Service (CDS) and Movement Reference Number (MRN)
CDS is HMRC’s electronic platform for recording imports and exports to and from the UK.
When CDS records an import into the UK, it will now issue a Movement Reference Number (MRN) for any imports or exports.
For imports, an MRN will now be issued instead of an IEN, however the two can be treated as equivalent.
Many warehouse providers (e.g. Amazon FBA) and logistics providers may still refer to the IEN, but in practice the MRN now also serves this role.
Ongoing compliance with TBA Global
Managing UK VAT registration, VAT returns, and IEN compliance can be complicated for overseas sellers. TBA Global offers complete support to simplify the process, including:
- UK VAT registration for ecommerce businesses.
- Preparation and submission of quarterly VAT filings.
- Coordination with freight forwarders to ensure customs declarations use the correct VAT number.
- Guidance on IEN record-keeping and compliance checks.
- Risk management to prevent rejected claims, penalties, or marketplace disruption.
Our team has extensive experience in cross-border ecommerce compliance, allowing sellers to enter and expand in the UK market with full peace of mind. With the right support in place, businesses can unlock the full potential of the UK ecommerce market.
