Postponed VAT accounting

Postponed VAT accounting is being introduced from 1 January 2021. This will affect you if you are VAT-registered and you import goods into the UK, particularly if you are a smaller business and you do not currently use the Duty Deferment Scheme. Postponed VAT accounting will apply to goods imported into the UK from all countries, regardless of whether they are in the EU or not.

Nature of postponed VAT accounting

The Brexit transition period comes to an end on 31 December 2020. From 1 January 2021, if you are a VAT-registered business in the UK, you will be able to account for import VAT on your VAT return for goods imported from anywhere in the world. This is good news as it means that you will declare and recover VAT on the same VAT return, rather than having to pay it upfront and recover it at a later date. This will be beneficial from a cash flow perspective.

The introduction of postponed accounting does not change the VAT that can be recovered as input tax; normal rules continue to apply.

Accounting for import VAT on your VAT return

You can start to account for import VAT on your VAT return from 1 January 2021. You do not need to be authorised in order to do so.

You can account for import VAT on your VAT return if:

  • you import goods for use in your business;
  • you include your EORI number, which starts with ‘GB’, on your customs declaration; and
  • you include your VAT registration on your customs declaration where needed.

You can also account for import VAT on your VAT return if you use certain customs special procedures, or if you release excise goods for use in the UK (also known as ‘released for home consumption’).

If you are eligible to defer submitting your supplementary declaration for up to six months, you must account for import VAT on your VAT return.

Customs special procedures

If you initially declare goods using one of the following special procedures, you can account for import VAT on your VAT return when you submit the declaration to release the goods into free circulation. The relevant customs special procedures are:

  • customs warehousing;
  • inward processing;
  • temporary admission;
  • end use;
  • outward processing; and
  • duty suspension.

Completing your VAT return

From 1 January 2021, there are some changes in the way in which you will need to complete your VAT return if you are a UK VAT-registered business importing goods into the UK and you account for import VAT on your VAT return.

You will be able to download an online monthly statement which will show the total import VAT postponed for the previous month, and which should be included on your VAT return. You should keep this statement for your records.

The changes affect boxes 1, 4 and 7.

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

In Box 4, you must include the VAT reclaimed in the VAT accounting period on imports accounted through postponed VAT accounting.

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

If you are eligible to defer your customs declarations, you must account for import VAT on the VAT return that covers the date on which you imported the goods. To do this, you will need to estimate the import VAT that is due from your records of the imported goods. When you submit your deferred declaration, your next online monthly statement will show the amount of import VAT due on that declaration. You must then account for any difference between the estimated figure and actual figure for the import VAT on your next VAT return.

When you can’t use postponed accounting

If you are authorised to use simplified declarations for imports and you complete your simplified frontier declaration before 1 January 2021, you will not be able to use postponed accounting to account for import VAT on your VAT return. This is the case even if you complete your supplementary declaration after 1 January 2021.

Consignments not exceeding £135 in value

HMRC are to issue guidance in due course on the VAT treatment of goods on consignments which do not exceed £135 in value.

We can help

Speak to us to find out what the changes mean for your business.