*Updated 4 March 2021*
It is difficult the quantify the impact on UK businesses from Brexit until all negotiations with the EU27 and other jurisdictions are finalised. However, there is one clear benefit to UK VAT registered businesses that will be available from 1 January 2021 – Postponed accounting for import VAT.
From 1 January 2021, you will be able to account for import VAT on your VAT Return for goods brought into the UK regardless of where in the world the goods have been moved from.
For the next 3 months, import VAT has to be brought to account at the time of import. The VAT, and any other customs charges, have to be either paid before the goods are released or allocated against an appropriate deferment account. Regardless of whether paid upfront or through the deferment process on the 15th day of the following month; UK businesses have to fund the cashflow cost of import VAT until it can be recovered on the next VAT return, which may be up to 3 months later.
For acquisitions from other EU member states, the UK business is responsible for accounting for an acquisition VAT due on the goods. This is declared on the VAT return and the VAT declared is recoverable on the same VAT return subject to the normal input VAT rules.
Import VAT after 1 January 2021
With effect from 1 January 2021, following the end of the Brexit Transitional period, all UK VAT registered importers will be able to account for the import VAT due through their UK VAT return.
Who can operate postponed import VAT accounting?
VAT registered businesses do not need to be authorised to account for import VAT through their VAT return. Businesses can account for import VAT if they enter goods to free circulation and:
- they include their VAT registration number on the customs declaration;
- they include their EORI number on the customs declaration; and
- The imported goods are for use for a business activity.
If goods are originally entered into a customs special procedure, import VAT due when these goods are released to free circulation can also be accounted on the VAT return through the postponed import VAT accounting regime. This includes goods entered to:
- Inward processing
- End use
- Duty suspension
- Outward processing
- Temporary admission
- Customs warehousing
The UK is applying a phased introduction of border controls from 1 January 2021. Under this phased approach, businesses bringing in goods from the EU after 1 January 2021 can have up to 6 months to submit the necessary import supplementary declarations.
When is payment of import VAT due?
As outlined above, VAT registered traders will be able to account for import VAT on their VAT return by using postponed VAT accounting from 1 January 2021. Unless they are eligible to defer their supplementary declarations, they will not be compelled to use postponed VAT accounting.
Non-VAT registered traders (and any VAT registered traders not using postponed VAT accounting) will need to report and pay import VAT through the customs processes. As with the current rules, VAT payments can be deferred using a Duty Deferment Account (DDA).
From 1 January 2021 VAT on imported goods in consignments with a value of up to £135 will not be collected at the point of importation. Businesses selling goods to be imported into the UK with a value not exceeding £135 will be required to charge and collect any VAT due at the time of sale. Such businesses will need to register for VAT in the UK and to account for the VAT due on their VAT return.
How to complete your VAT Return from 1 January 2021
Postponed accounting allows you to declare and recover import VAT in the same VAT return. An online monthly statement will be available to download and keep for your records. The statement will show the value of import VAT postponed for in the previous month which you should include in your VAT return.
The following entries should be made to the VAT return:
|VAT Return Box||What You Should Include|
|Box 1||The VAT due in this period on the imports which have been accounted for through postponed VAT accounting|
|Box 4||The VAT reclaimed in this period on the imports which have been accounted for through postponed VAT accounting|
|Box 7||The total value, excluding any VAT, of all imports of goods included on your online monthly statement|
If you are eligible to defer the submission of the customs supplementary declarations during the initial 6 months of 2021, the import VAT will still be due based on the date of importation. As these goods will not be included on the online monthly statement at the time, businesses will need to estimate the import VAT due from their record of imported goods.
When the deferred declaration is subsequently submitted, these imports, and the relevant import VAT, will appear on the next online monthly statement. Businesses will be required to adjust their previous estimates and account for any differences on their next VAT Return.
Get ready for Postponed Import VAT Accounting
HMRC have issued further guidance this month detailing the requirement to obtain a portal registration to enable you to review your monthly postponed VAT accounting statements for the goods which have been imported into the UK after 31.12.20.
Following registration, the portal will display your monthly statement which details the total import VAT postponed for the previous month. The statements will be available to view in the first half of the month. The link for access to the monthly statements is here https://www.gov.uk/guidance/get-your-postponed-import-vat-statement.
Each monthly statement will be available for 6 months following which they will drop off the system. We would recommend that each month’s statement is downloaded and saved to your VAT file to support your postponed import VAT calculations.
To register for HMRC’s online portal, you should have your HMRC Government Gateway ID and Password which is linked to your EORI number to hand. A Government Gateway ID and Password can be created at registration if necessary. In addition, the following information should be to hand as this will be required as part of the registration process;
- EORI Number
- Business Establishment Date
- Business Address
- UTR number
- Contact Email for the notifications on the account
If you import goods and are a member of a VAT group you will have your own EORI and should access your own statement. You should send it to the representative group member who needs all the statements to complete the VAT return for the whole group.”
Further information can be found in the link to the HMRC guidance below, which also includes the link to start the registration process and which allows registration with HMRC’s Customs Declaration Services (CDS). See here for more information.
Furthermore, in order to use postponed VAT accounting it is necessary to ensure that you complete your customs declarations correctly as you must select that you will be accounting for import VAT on your VAT return on the declaration. Failure to do so will result in the Import VAT being payable on arrival and recoverable on the VAT return on receipt of a C79.
If you use the Customs Handling of Import and Export Freight (CHIEF) system;
On your declaration, you’ll need to enter:
• your EORI number starting with ‘GB’ which includes your VAT registration number into box 8 (Header Consignee), or, if applicable, your VAT registration number in box 44h (Registered Consignee)
• ‘G’ as the method of payment in Box 47e
If you use the Customs Declaration Service;
• You need to enter your VAT registration number at header level in data element 3/40.
• VAT will be recorded against your EORI and will be at declaration level only.
How can AAB help
If you require more information about the changes to the import and export regimes after 1 January 2021, please refer to our “Life After Brexit” document which features a summary of the key Government guidance.
If you require further information or support on your post 1 January 2021 VAT reporting obligations, please contact Alistair Duncan, Indirect Tax Director, or your usual AAB contact.