Postponed accounting for import VAT

30th September 2020

Both UK businesses and overseas businesses should be aware of the postponed accounting for import VAT which is being introduced with effect from 1 January 2021.

Currently, when a UK VAT registered business imports goods into the UK from outside of the EU, import VAT is due at the border. This import VAT is then recoverable on the quarterly VAT returns of the business upon receipt of a C79 certificate (subject to the usual VAT recovery position of the business). This often leads to a cash flow disadvantage as the import VAT is payable at the time of import but can only been reclaimed when the VAT return becomes due.

With effect from 1 January 2021, goods being brought into the UK from the EU will also be classified as imports, when previously these were EC acquisitions and not subject to import VAT. This will therefore lead to an increase in import VAT being payable by UK VAT registered businesses, which in turn will have a bigger cash flow impact.

This cash flow disadvantage will be removed by the introduction of the postponed accounting for import VAT.

So, what is postponed accounting for import VAT?

The way this will work will be to have any import VAT deferred and accounted for on the quarterly VAT returns of the UK registered business, instead of having to pay the import VAT when the goods arrive into the UK.

HMRC will issue online statements detailing all of the import VAT that has been postponed in each month, which would then be included on the VAT returns. The import VAT amount would simply be included in box 1 of the VAT returns and the same amount reclaimed as input VAT in box 4 of the VAT returns (subject to the usual recovery position of the business).

In order to use this postponed accounting, the goods being imported must be for use in the business and crucially the EORI number of the business must be shown on the customs declaration.

The postponed accounting for import VAT is also available when declarations are submitted to release goods into free circulation from any of the following customs special procedures:

  • Customs warehousing
  • Inward processing
  • Temporary admission
  • End use
  • Outward processing
  • Duty suspension

So what to do now?

If you are a regular importer of goods, it is likely that you will already have an EORI number and there is no need to take any action at this stage. However, any businesses that are currently bringing goods in from the EU or which only import occasionally should ensure that they have a valid EORI number and be aware of these new rules.

As requests for EORI numbers are likely to increase the closer we get to 31 December, processing times are likely to increase so we would suggest applying for one sooner rather than later.

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