The UK is scheduled to leave the EU and the EU VAT regime on 31 December 2020.
As a result, the UK will introduce a Postponed Accounting scheme for import VAT. This scheme allows all UK VAT registered businesses to declare and recover import VAT on the same VAT Return, instead of having to pay it upfront via the customs declaration and recover it later. This will ease cash flow for businesses importing goods into the UK post-Brexit.
Using Postponed Accounting
From 1 January 2021, any UK VAT registered business (resident and non-resident) with a GB EORI number importing goods for use in their business can account for import VAT on their VAT return.
Although the use of Postponed Accounting for import VAT is not mandatory, businesses that decide to defer the submission of import declarations in the first six months of 2021, are obliged to use import VAT Postponed Accounting for imports in that period.
It seems logical to also oblige companies that import small consignments (not exceeding £135 in value), in using import VAT Postponed Accounting for those consignments. However, HMRC are yet to provide further guidance on the VAT treatment of such consignments.
Completing a VAT Return
The published legislation states that any VAT registered person may postpone the accounting of import VAT to its periodic VAT return, unless if this option is revoked by HMRC.
To use the Postponed Accounting scheme, importers simply need to ensure that their VAT registration number is shown on the import declaration.
Traders using Postponed Accounting can obtain a monthly statement of all their imports that were submitted from HMRC. The relevant VAT and VAT value details should be reported in the subsequent periodic UK VAT return as follows:
- Box 1 – Total VAT due in this period on imports accounted for through postponed VAT accounting.
- Box 4 – Total VAT reclaimed in this period on imports accounted for through postponed VAT accounting.
- Box 7 – Total value of all imports of goods included on your online monthly statement, excluding any VAT.
Where a VAT-registered business chooses to delay submitting their import declarations and the actual import VAT value is not known yet, an estimate of the import VAT amount needs to be accountable in the relevant VAT return. An adjustment may be required when the import declaration is subsequently filed and the actual import VAT amount is different from the provisional calculation.
Non-VAT registered businesses
For non-VAT registered businesses, postponed VAT accounting is not available. They will have to pay any import VAT due via the customs declarations.
For any questions, please feel free to contact:
Arjen Odems, email@example.com
Maartje Meijer, firstname.lastname@example.org