17 Feb VAT on Imports: Postponed VAT Accounting
Following the UK’s departure from the EU on 1 January 2021, the Government has introduced ‘postponed accounting’ for import VAT on goods brought into the UK from that date. As a result, UK registered businesses importing goods into the UK will be able to account for import VAT on their VAT Return, rather than paying import VAT on or soon after the goods arriving at the UK border.
The new rules apply to imports from both EU and non-EU countries and will not remove the requirement of customs declarations and the payment of other duties.
If you are VAT registered, you will be able to reclaim any VAT you paid on the goods you have imported. You will need your Import VAT certificate (C79) in order to do this.
Why use Postponed VAT Accounting (PVA)?
The new method is designed to avoid the cashflow impact of paying import VAT before you are able to make the reclaim on your VAT Return. You declare both the import VAT and reclaim it as input tax on the same VAT Return.
You do not need any approval to account for import VAT on your VAT Return using PVA. You are able to use this method if:
- The goods you import are for use in your business and
- You include your VAT registration number on your customs declaration.
How to Account for Import VAT through PVA
HMRC will provide you with a monthly postponed accounting report through your online account which will provide the information required for your VAT return. The reports will only be available online for 6 months and, as they are an important part of your VAT accounting records, you should download these and retain copies for your records.
Under MTD these values cannot be manually adjusted and must be recorded in the main record-keeping software.
The transactions will be entered into your VAT Return as follows:
Box 1: include the VAT due on imports accounted for through PVA
Box: 4: include the VAT reclaimed in this period on imports accounted for through PVA
Box 7: include the total value of all imports of goods in this period, excluding any VAT
A business can still choose to pay import VAT on importation and then reclaim the VAT incurred as input tax subject to the normal rules if they do not wish to use PVA.