Currently, VAT from 3rd country imports is due on arrival, or on release of the goods into free circulation. From the 1st January 2021 postponed VAT accounting (PVA) is being introduced for EU and non-EU imports of goods.
This means that all UK VAT-registered traders who import goods into the UK, excepting those that operate a Duty Deferment facility (which defers payment to the fifteenth of the following month) will account for import VAT on their quarterly VAT returns.
The import VAT can then usually be reclaimed as input tax on the next VAT return (subject to the normal VAT rules on input tax deduction).
Announced in the last budget this is a welcome measure, which mitigates cashflow concerns for businesses that import goods.
Traders can account for import VAT if:
- The goods they import are for use in their business
- Their EORI number, which starts ‘GB’ is on the customs declaration
- Their VAT registration number is on the customs declaration, where needed
UK VAT registered importers will be able to elect to use PVA on their customs declaration. PVA will not, ordinarily, be mandatory and it will be possible for importers to continue to use the current process to pay, defer or (if appropriate) secure the VAT on importation if they so wish. They can then choose to start using PVA at any time after 11pm on 31st December 2020. It will also be possible for importers to use PVA for some imports and existing means of payment for others.
Goods moved into a customs special procedure, can be accounted for import VAT in the VAT Return when a declaration has been submitted to release those goods into free circulation from:
- Customs warehousing
- Inward processing
- Temporary admission
- End use
- Outward processing
- Duty suspension
Traders will not be able to account for import VAT on their VAT Return if they are authorised to use simplified declarations for imports and complete the simplified frontier declaration before 1st January 2021.
Staged Approach from 1st January 2021 until 30th June 2021
VAT registered traders who import standard (non-controlled) goods into GB from the EU and who make an Entry in Declarants Records (EIDR) under the staged approach to import controls will be required to use PVA to account for the import VAT on those goods.
Making the EIDR allows the trader to defer submission of their supplementary declaration by up to 6 months from the point of import, and they will be required to use PVA irrespective of when they submit their supplementary declaration.
Where the importer does defer their supplementary declaration, they will not have a Monthly Postponed Import VAT Statement (MPIVS) when they complete their VAT return. They will therefore need to use the information on their EIDR or other commercial import records to estimate the amount of import VAT due and account for that tax on the VAT return relating to the month of import.
For example the VAT on goods imported in January 2021 will be accounted for on the VAT return that covers January 2021.
When the deferred declaration is subsequently submitted, the next online monthly statement will show the amount of import VAT due on that declaration. The trader will then be able to adjust their estimate and account for any difference on their next VAT Return.
When the deferred declaration is subsequently submitted the actual amount of import VAT will be calculated and tax due to be accounted for will be recorded on the Monthly Postponed Import VAT Statement (MPIVS) for the month the declaration is submitted. This should be compared to the estimated amount and any adjustments required should be made on the next VAT return.
Metro’s ‘Brexit Ready’ web portal has been designed to prepare your business for the 1st January 2021