Postponed VAT Accounting is a new option for when you can Account (& pay) your Import VAT for goods imported from anywhere in the world.
This was introduced for 1st January 2021.
What are the options?
- You can add the Import VAT to your VAT Statement and pay when that is due (hence the “Postponed VAT” moniker); or
- Continue to pay import VAT when your goods arrive in the UK.
(as was the only way prior to the Postponed VAT Accounting option being available)
While the amount of VAT paid will be the same in either option, the change in cash flow is what you can benefit from.
Who can use Postponed VAT Accounting?
As stated on HMRC’s web site:
“If your business is registered for VAT in the UK, you can account for import VAT on your VAT Return for goods you import into:
• Great Britain (England, Scotland and Wales) from anywhere outside the UK
• Northern Ireland from outside the UK and EU
You can also account for import VAT for goods you move between Great Britain and Northern Ireland that are declared into a customs special procedure when they are removed from that special procedure.
There are no changes to the treatment of VAT or how you account for it for the movement of goods between Northern Ireland and the EU.
You do not need any approval to account for import VAT on your VAT Return.”
What are the conditions?
Before you can start using the Postponed VAT Accounting option in your business there are a few conditions that need to be met:
• Business Use
The goods being imported are for business use or both business and non-business use.
Goods bought solely for non-business use must have their Import VAT paid when imported; you cannot include (postpone) these on your VAT Return.
• Customs Declaration
Include your EORI number (starting with ‘GB’) and VAT Registration No. on your customs declaration.
• Customs Declaration Service
Register for Customs Declaration Service (CDS) so you can view your monthly import statements.
Please refer to HMRC’s web page for further details on the above.
Changes to your VAT Return
The Postponed VAT Accounting option does not change what can be reclaimed as input tax, but there are changes to what you include on your VAT return boxes (1, 4 and 7).
You will need to Include your input tax on the VAT return period that covers the date you imported the goods.
As stated on HMRC’s web site and copied below:
Box 1 (Output VAT)
Include the VAT due in this period on imports accounted for through postponed VAT accounting. You’ll be able to get this information from your online monthly statement, or you must estimate the amount if you do not have a statement and have delayed your customs declaration.
Box 4 (Input VAT)
Include the VAT reclaimed in this period on imports accounted for through postponed VAT accounting. You must estimate the amount if you do not have a statement and have delayed your customs declaration.
Box 7 (Net Value of Purchases)
Include the total value of all imports of goods in this period, not including any VAT.
This article is only meant as an overview of the Postponed VAT Accounting option for imported goods. It should not be taken as advice or relied on as advice as we are not tax experts.
For further information and advise on how this impacts your business you should contact a VAT advisor or read more from gov.uk (e.g. Check when you can account for import VAT on your VAT Return – GOV.UK (www.gov.uk)).
Extracts from & links to web sites are correct as of 4th March 2021.