Import VAT is charged on goods brought into the UK as if they had been sold here, which is what stops an imported item being cheaper than a domestic one purely because of tax. For a VAT-registered business it is usually recoverable, so the real question is not whether you pay it but when: at the border, or on the return. That choice is postponed VAT accounting, and it is the single biggest cash-flow decision in importing.
The two ways to pay it
Without postponed VAT accounting, import VAT is paid when the goods arrive, usually by your freight agent who then bills it back to you, and you reclaim it on a later return once you hold the certificate. The money is out of the business in the meantime. With postponed VAT accounting you declare the import VAT and reclaim it on the same return, so nothing leaves the business at all. GOV.UK's guidance sets out who can use it and how to tell your customs agent to.
Where it lands on the return
Under postponed accounting the import VAT goes into box 1 as VAT due, and into box 4 as VAT reclaimed if you are entitled to recover it, with the net value of the goods in box 7. The two cancel and the effect on box 5 is nil, which is the point. The figures come from the monthly postponed import VAT statement rather than from the supplier's invoice, and reconciling to that statement rather than to the purchase ledger is what keeps the quarter right.
What import VAT is not
It is not customs duty, which is a separate charge based on the commodity code and origin of the goods and is not recoverable at all: duty is a cost, import VAT usually is not. It is also not the supplier's VAT: an overseas supplier should not be charging you their own country's tax on goods being exported to you, and an invoice that shows some is worth querying before you pay it, because it is not recoverable on a UK return.
Questions people ask about vat on imported goods
Can I reclaim import VAT?
Usually yes, if the goods are for your business and you hold the right evidence: the monthly postponed import VAT statement, or the import VAT certificate where VAT was paid at the border.
What is postponed VAT accounting?
Declaring import VAT on your return instead of paying it at the border. It goes into box 1 and, if recoverable, box 4, so the net effect on what you pay is nil.
Is customs duty the same as import VAT?
No. Duty depends on the commodity code and origin and is a real cost you cannot reclaim. Import VAT is usually recoverable by a VAT-registered business.