Example calculation - import taxes for a guitar and amp

Example 2: a Fender Stratocaster guitar ($600) and a SansAmp Programmable Bass Driver ($400), shipped in one parcel from the USA to the UK

Data:
• Let’s buy a Fender Stratocaster electric guitar for $ 600.00 (including sales tax) and a SansAmp Bass Driver DI for $ 400.00 (including sales tax)
• Total Shipping cost: $ 200.00
• The consignment is insured up to $ 500.00 for $ 10.00
• Official exchange rate by customs agencies on June 1st, 2009: 1.56 USD to 1 GBP
• Duty tax rate for electric guitars: 3.7%
• Duty tax rate for amplifiers: 2.7%
• VAT tax rate in the UK: 20.0%

Calculation:

Step 1 of 9 - Calculate the customs value
+ $   600.00 <- price of the Fender Stratocaster electric guitar including sales tax
+ $   400.00 <- price of the SansAmp Bass Driver DI
+ $   200.00 <- shipping cost
+ $     10.00 <- insurance cost
-----------------
= $ 1,210.00

Step 2 of 9 - Split the shipping cost and insurance cost between the guitar and the amplifier
The value of the guitar is 60% of the total value of the goods, therefore: 
• the shipping cost allocated to the guitar equals = $ 200.00 x 60% = $ 120.00
• the insurance cost allocated to the guitar equals = $ 10.00 x 60% = $ 6.00

The value of the amplifier is 40% of the total value of the goods therefore
• the shipping cost allocated to the amp equals = $ 200.00 x 40% = $ 80.00
• the insurance cost allocated to the amp equals = $10.00 x 40% = $ 4.00

Step 3 of 9 - Calculate the customs value
• for the electric guitar
+ $ 600.00 <- price of the electric guitar including sales tax
+ $ 120.00 <- shipping cost
+ $ 6.00 <- insurance cost
-----------------
= $ 726.00

• for the amplifier
+ $ 400.00 <- price of the amplifier including sales tax
+ $ 80.00 <- shipping cost
+ $ 4.00 <- insurance cost
-----------------
= $ 484.00

Step 4 of 9 - Convert into £
• the electric guitar
$ 726.00 / 1.56 = £ 465.38 

• the amplifier
$ 484.00 / 1.56 = £ 310.25 

Step 5 of 9 - Calculate the import duty
• for the electric guitar
£ 465.38 x 3.7% = £ 17.21 
• for the amplifier
£ 310.25 x 2.7% = £ 8.37

Note: Duty payable on the amplifier is below the minimum threshold of £9, therefore it is not collected or waived. 

Step 6 of 9 - Calculate the value on which the VAT will be paid
• for the electric guitar
+ £ 465.38 <- customs value of the electric guitar
+ £   17.21 <- import duty USA to UK
-----------------
= £ 482.59 

• for the amplifier
+ £ 310.25 <- customs value of the amplifier
+ £     0.00 <- import duty USA to UK
-----------------
= £ 310.25 

Step 7 of 9 - Calculate the VAT
• for the electric guitar
£ 482.59 x 20.0% = £ 96.51 
• for the amplifier
£ 310.25 x 20.0% = £ 62.05

Step 8 of 9 - Get the total calculation for import duty and VAT per item
• for the electric guitar
+ £  17.21 <- import duty
+ £  96.51 <- VAT
-----------------
= $ 113.72 

• for the amplifier
+ £    0.00 <- import duty
+ £  62.05 <- VAT
-----------------
= $  62.05

Step 9 of 9 - Total Import Duty & VAT 
+ £ 113.72 <- import duty and VAT for the Fender Stratocaster electric guitar
+ £   62.05 <- import duty and VAT for the SansAmp amplifier
------------------
= £ 175.77

Total import duty and VAT for the guitar and the amplifier is therefore £ 175.77.

The total landed cost equals = £ 951.40, that is:
+ £ 775.63 <- total cost of the guitar, the amplifier, shipping and insurance in £
+ £ 175.77 <- total import duty and VAT on the guitar and the amplifier
------------------
= £ 951.40

Note: The shipping provider might charge additional fees.