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Postponed VAT Accounting

Postponed VAT Accounting

Chris Goodwin

What is postponed accounting?

​Postponed accounting means that the importer does not pay import VAT when goods arrive at a port or airport instead the VAT is deferred.

A brief rundown of the current rules

You must tell HMRC about goods that you bring into the UK, and pay any VAT and duty that is due. How you do this will depend on whether the goods or services are received from an EU country or not. You may also be able to defer, suspend, reduce or obtain relief from import VAT.

-    If you’re registered for VAT in the UK and receive goods from countries in the EU you’ll normally account for the VAT through your VAT Return. You’ll need to account for the VAT at the same rate that you would have paid if you had bought them from a UK supplier.

-    If you are not VAT registered and receive goods from countries in the EU, your supplier will charge VAT at the local rate in the EU country from which the goods are supplied.

-    If you import goods that you’ve bought from non-EU countries they’re normally charged at the same rate as if they had been supplied in the UK.

-    If you’re a UK trader and not registered for UK VAT you still have to pay the import VAT, but you will not be able to reclaim it.

What will the new rules look like?

For a business that is registered for VAT in the UK, it will be able to account for import VAT on VAT returns for all goods imported from any country in the world. This process will function by declaring and recovering import VAT on the same VAT return submitted, instead of having to pay the cost upfront and recover it further down the line. This process is normally called “postponed accounting” and offers simplification and cash flow benefits in comparison to the current rules for imports from outside of EU member countries.

The normal rules about what VAT can be reclaimed as input tax will still apply!

“Postponed accounting” will be viable to import VAT under these conditions:

-    The goods are imported for business use
-    The business’s EORI number, which starts GB, is included on the customs declaration
-    The business’s VAT registration number is shown on the customs declaration, where needed.

Special procedures - For businesses wanting to declare goods into a “customs special procedure”, they will be able to account for import VAT on their VAT return when they submit the declaration to release the goods into free circulation. 

How does it work?

Postponed accounting will mean that the business importing does not pay import VAT when the goods arrive at the UK port or airport. Instead the importer posts the VAT to Box 1 of their relevant VAT return (acquisition tax). This is assuming they can claim input tax in full on the goods (no private, exempt or non-business use), the same amount is claimed as input tax in Box 4 on the same return.

The next step - VAT return completion

Once the goods have been imported, the requirement will be to account for import VAT on the next VAT return. An online monthly statement showing total import VAT postponed for the previous month that should be included on the VAT return, will be available to the importer to download and keep. Due to postponed accounting, there will be changes to how the VAT return should be completed.

Steps to complete your VAT return

-    Box 1 must include the VAT due in the period on imports accounted for through postponed VAT accounting.

-    Box 4 must include the VAT reclaimed in the period on imports accounted for through postponed VAT accounting.

-    Box 7 must include the total value of all imports of goods included on the online monthly statement, excluding any VAT.

If you are going to be importing goods that are not controlled from the EU into Great Britain between the dates of 1st January 2021 and 30th June 2021 and delay your customs declaration, you will have to account for the import Vat on the Vat returns which will include the date you imported the goods. To complete the numbered boxes on your VAT Return, you’ll need to estimate the import VAT due from your records of imported goods.

Situations where postponed accounting will not apply

It will not be possible to use postponed accounting for imports made under authorisation to use simplified declarations for imports, where simplified frontier declarations are made before 1st January 2021. This will be the case even if the supplementary declaration is made after this date.

The new regulations for postponed accounting have been approved and the treasury will announce the date that these regulations will come into place. HMRC has not yet commented on if “postponed accounting” will be used in scenarios other than a no-deal Brexit.

If you require assistance or need advice on the above or any other tax and business related matter please contact your local Moore (South) office