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Postponed VAT accounting for imported goods

As of January 1st 2021, VAT registered businesses that import goods into the UK can use a new system called postponed VAT accounting. This allows businesses to account for the import VAT on their VAT Return instead of paying it immediately upon entry to the UK.

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Now that the UK has left the EU, VAT is due on imports from anywhere in the world if the value of the goods is over £135 (commercial goods threshold). This article outlines what postponed VAT accounting is, who can use it, and how it will look on your VAT Return.

What is postponed VAT accounting?

The goal of postponed VAT accounting is to defer the payment of import VAT so that businesses don’t experience a negative impact on their cash flow.

In normal circumstances, commercial goods exceeding £135 entering the UK would be held at customs until the import VAT has been paid. With the postponed VAT system, businesses will not need to pay the VAT immediately, but rather record the import VAT on their VAT Return.

Businesses who use this system will need to state on their customs clearance paperwork that they will postpone the VAT. They will also need to include their VAT registration number (VRN). Businesses will be able to access a statement of their postponed VAT through the CDS customs system.

Who can use the postponed VAT accounting scheme?

The postponed VAT accounting scheme is optional. If you’d prefer to pay the import VAT immediately, you can certainly do so.

You do not need approval from HMRC to postpone the VAT. As long as you are a UK VAT registered business importing goods from outside the UK, you can postpone the VAT (Northern Ireland information below). However, there are a few requirements for the import:

  • The imported goods are for business use only
  • Your business must enter a GB or XI (Northern Ireland) EORI number on the customs declaration
  • Your UK VAT registration number must be entered on the customs declaration
  • Your customs declaration must state that you will postpone the VAT (Box 47e)

Getting customs clearance can be a complex process and most businesses use a transporter or customs agent to do this for them. If you hire a company to submit your customs declarations, make sure they are aware that you wish to use the postponed VAT scheme.

Postponed VAT on your VAT Return

When it’s time to submit your VAT Return, you will need to report the postponed import VAT. First, you will need to obtain your VAT statement from the CDS customs system. You can then enter the information on your VAT Return:

  • Box 1 (VAT due on sales and other outputs): Include the VAT due from imports using the postponed VAT scheme here
  • Box 4 (VAT reclaimed on purchases and other inputs): Include the VAT reclaimed on imports that used the postponed VAT scheme here
  • Box 7 (Total value of purchases and all other inputs excluding any VAT): Include the value of all imported goods, excluding VAT

If you do not use the postponed VAT accounting scheme, but pay the VAT immediately, then you will only need to fill in boxes 4 and 7.

Due to Brexit, policies and procedures can change quickly. You should visit the UK Government website for the most up to date guidance.

Does postponed VAT affect Northern Ireland?

Since Northern Ireland is still part of the EU VAT area, imports into Northern Ireland from the EU will not incur import VAT. They are still treated as intra-EU supplies after Brexit, so the reverse charge should be used.

However, for imports from the rest of the world, your Northern Irish business can use the postponed VAT accounting scheme.

Furthermore, goods travelling between Northern Ireland and Great Britain will not incur import VAT, but rather be treated as a domestic sale.

Software for postponed VAT accounting

Invoicing software not only helps you to create and send invoices, but it can also help you record your import VAT and submit VAT Reports directly to HMRC.

With Debitoor invoicing software, you can connect your account directly to HMRC in just a few clicks. In addition, you can record import VAT as an expense on your account and it will automatically enter it in the correct fields on your VAT Report for postponed VAT accounting.

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