A tax on your gifts

This past Christmas, we spent $280 to receive presents.

I'm not talking about money we spent to send presents. (Though that amount was considerably higher.)

Rather, the $280 was money we were taxed by the U.K. government to receive gifts sent to us. The government held the gifts hostage until we paid. It's a procedure almost indistinguishable from a mafia goon intercepting our mail and forcing us to cough up some cash to get the presents.

The folks sending the gifts spent hundreds of dollars in shipping costs. Our payment of $280 -- costing roughly £46, £57, and £67 for three boxes -- was on top of the hundreds of dollars the senders paid. All told, in shipping costs and taxes, it cost more than a thousand dollars to send us presents from the States.

One of the boxes of gifts from the States. Jackson "delivered" it with his crane.

Whoa.

How about some Amazon gift cards next year?

According to Notice 143 of Her Majesty's Revenue and Customs (you can find it here), if you receive a gift or gifts collectively valued at more than £36 (at current exchange rates = $59.50), you have to pay an import VAT on any amount higher than the £36. The tax rate is the same as if you had purchased the goods in the U.K. But then the government penalizes you a bit further. How dare you receive a gift that wasn't bought in the U.K.? The government will calculate the import VAT on the basic price of the goods + the entire cost of postage, packaging, and insurance + any customs or excise duties charged.

Those same gifts might also be charged an excise tax if it's alcohol or tobacco, and a customs duty if the collective value is more than £135. To stick the knife in further, after the calculation of the taxes and duties, you then have to pay the U.K. government handling the mail inside the U.K. a "clearance fee" -- essentially, a handling charge. This clearance fee or handling charge is somehow deemed to be appropriate even though the sender of the gifts already spent hundreds of dollars in shipping charges.

The "clearance fee" was earned by Parcelforce because, y'know, it's hard work to receive a package from a foreign shipping company and then send out a form ransom letter.

If a package contains gifts for multiple people, then each individual receiving a gift (or gifts) has a separate calculation for import VAT. For example, if one person receives two gifts of £10 each then there is no charge for those items, but a second person who receives three gifts of £20 each will pay the import VAT on the amount over £36 (i.e., taxed on £24). Each of the gifts must be individually wrapped, specifically addressed to the individual, and declared separately on a customs sheet.

How do they know what's inside? Well, for starters, the senders are required to declare the items and cost on a form. The shipping company should be verifying the accuracy of that declaration. But in any case, the Royal Mail and Parcelforce are free to open the packages and examine them.

What is Parcelforce Worldwide? It is a U.K. government courier service; it was rebranded from Royal Mail Parcels to Parcelforce in 1990. It is a direct competitor to DHL, UPS, FedEx, etc. Most amazingly, if you pay to ship a parcel to the U.K. via UPS or FedEx or some other company, that package gets delivered not to your intended recipient but to Parcelforce, which then tacks on the aforementioned clearance fee. To my understanding, every foreign parcel is delivered first to a hub in Coventry, England, and then later delivered to the intended recipient.

Note that these taxes and customs duties are applied even when the recipient didn't ask for the gifts, didn't know the gifts were coming, didn't want to the gifts, and so on. The recipient is charged regardless. So when grandma sends her two-year-old grandson a gift, that two-year-old has to pay up to receive his birthday or Christmas present.

Enjoy the presents, kid. The taxes are coming out of your college fund.

So think twice before you send a gift to a U.K. recipient. You're likely going to pay less money to order it online from a U.K. company (and even have it wrapped) than you'll pay in shipping charges from the U.S. (If you're shipping from an EU country, you generally won't be charged these fees.) And your U.K. recipient won't be charged for receiving it.