Deferred accounting for VAT on imports

  • By Emma Gilbert‑Smith
  • 27 October 2020 16:18

Also known as “postponed accounting”, the above scheme will be introduced from 1 January 2021 to help mitigate the cash flow impact of Brexit on businesses that buy goods in from the EU.

When an intra-EU supply of goods is made to a customer in the UK, subject to certain conditions being met, the UK customer will not be charged VAT. The UK customer will account for VAT on the acquisition on their UK VAT return and can reclaim the VAT as input tax subject to the normal rules.

When the 11-month transitional period ends on 31 December 2020, the UK will no longer be part of the EU VAT Territory. Movements of goods from suppliers in the EU will no longer be treated as EC acquisitions and will instead be treated as imports.

VAT is a tax on importation, and currently import VAT must be paid when the imported goods enter the UK, before they are released by customs.  The importer will obtain a C79 certificate to show the amount of import VAT paid, and will use this certificate to substantiate any input tax reclaim on the VAT return for the period that covers the date of importation. 

It can therefore take months to recover the import VAT, so the government has introduced the postponed accounting scheme to counter this cash flow issue.  The scheme will apply to imports from all over the world, not just those from EU suppliers. Customs declarations and the payment of any other duties will still be required.

Upfront import VAT will not be paid, and the importer will account for import VAT on the VAT return.

It will be possible to use the scheme if:

  • The goods imported are for use in the business
  • The importer’s EORI number is included on the customs declaration
  • The importer’s VAT registration number is included on the customs declaration.

Separate rules will apply to imports where the consignment does not exceed £135 in value.

To complete the VAT return, importers will be able to access an online statement that shows the import VAT paid. VAT on imports will be included in Box 1 of the return, and reclaimed in Box 4 according to the normal rules.

HMRC have published guidance on when postponed accounting can be used, which can be accessed here. For more details of how to account for import VAT in the VAT return, please see here.

The VAT impact of Brexit is just one of the topics covered in our course “VAT Update and Current Issues” for more information or to book on a course visit our website by clicking here.

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