What is postponed VAT accounting?
Postponed VAT accounting is a way for UK VAT-registered businesses to account for import VAT after Brexit. Businesses can record the VAT on their VAT Return rather than paying it immediately upon entry of the goods into the UK.
Imports and exports can be complicated. Read more about how to record import VAT for your business on our blog.
This article outlines what the postponed VAT accounting scheme is, who can use it, and how to fill in your customs declaration and VAT Return.
How does postponed VAT accounting work?
After the UK officially left the EU on January 1st 2021, importers were required to pay VAT on goods entering the UK if the value of the goods exceeded a certain threshold. The UK government created the postponed VAT accounting scheme to help businesses avoid a negative impact on their cash flow by delaying the VAT payment.
Without the postponed VAT scheme, commercial goods over £135 entering the UK would be held at customs until the VAT was paid. Now, businesses can delay the payment by recording the import VAT on their quarterly VAT Return instead of paying it immediately.
Who can postpone VAT?
To be eligible for the postponed VAT accounting scheme, you must be a UK VAT registered business who imports goods for business use into the UK.
It is an optional scheme, so you can pay the VAT immediately if you wish. You also do not need approval to postpone the VAT, you can start using this system immediately if you are VAT registered.
For businesses in Great Britain, this scheme applies to imports from anywhere outside the UK.
Since Northern Ireland is still part of the EU VAT area, the postponed VAT scheme does not apply to imports into Northern Ireland from the EU. In these cases, the reverse charge will still apply. For imports from anywhere else in the world, you can postpone the VAT.
Furthermore, sales between Northern Ireland and Great Britain are considered domestic transactions and are not eligible under the scheme. For these sales, the standard UK VAT procedure will apply.
Postponed VAT on your customs declaration
If you decide to use the postponed VAT accounting scheme, you will need to declare this on your customs declaration. Since customs declarations can be complex, most businesses hire a transporter or customs expert to complete them.
Here are a few fields that must be completed on the customs declaration if you wish to postpone the VAT:
- Your “GB” or “XI” (Northern Ireland) EORI number
- Your UK VAT number (VRN)
- Box 47e (method of payment) stating that you wish to postpone the VAT payment - use code “G”
If your customs declaration is incorrect or missing the above information, you may experience delays or penalties. Make sure that you keep records of your customs or VAT declarations for at least 6 years.
Postponed VAT on your VAT Return
If you have postponed VAT on your imports, you will need to declare the VAT on your VAT Return. You can download your VAT statement which includes the deferred VAT payments from a specific period from the CDS customs system. Once you have your statement, you can include those figures in the following boxes on your VAT Return:
- Box 1: Include the VAT due from postponed VAT accounting
- Box 4: Include the VAT reclaimed on imports from the postponed VAT scheme
- Box 7: Include the ex-VAT value of imported goods
If you choose to not use the postponed VAT scheme for some imports, you will only enter the figures in boxes 4 and 7.
It is important to correctly record the postponed VAT on your VAT Return in order to avoid penalties and mistakes. Since processes change quickly, you should seek the most up to date advice from the UK Government website.
Keeping track of your postponed VAT
Invoicing and accounting software can help you keep track of all things related to your business finances. With some software, like Debitoor, you can even connect your account directly to HMRC to submit your VAT Return in a few clicks.
On your Debitoor account, you can simply record import VAT as an expense and it will automatically be entered in the correct fields on your VAT Return. Give it a go with our 7-day trial.