VAT Deferral on Imports
9th November 2020
Any goods that you bring into the UK, you must inform HMRC about and pay any VAT and duty that is due. How you do this may depend on whether the goods or services are received from an EU country or not. You may also be able to defer, suspend, reduce or obtain relief from import VAT.
Import controls on EU goods at the border from 1st January 2021
The Government has announced a number of policy easements for a potential no deal exit so business have more time to prepare:
- The Customs Simplified Freight Procedure (CSFP) (introduced by HMRC to reduce congestion at customs checkpoints by allowing businesses to defer full import declarations until a later date)
- Deferred import VAT accounting (this refers to the payment of import VAT on the VAT return, rather than at the time of release of goods into the UK, mitigating the cash flow impact of imports and replicating the treatment for goods moved within the EU); and
- Temporary tariff easement measures (various measures, including transitional simplified procedures above, which were designed to support businesses to comply with new requirements in a no-deal scenario). This may change if tariffs are applied on UK exports – so needs to be monitored.
VAT Deferral on Imports Explained
Within this guide is information on what you need to import from the EU to the UK from January 1st – here’s the list with links to the relevant information:
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1 - What are UK Brexit Postponed Accounting VAT returns'
The UK has introduced a deferred import VAT scheme – Postpone Accounting – so traders importing goods into the EU and rest of the world will not have to make cash payments of import VAT.
This can be recorded through a UK VAT return, which is completed by all UK VAT registered businesses – both UK resident and non-resident.
If your business is VAT registered
From 1 January 2021, if your business is registered for VAT 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 means you will declare and recover import VAT on the same VAT Return, rather than having to pay it upfront and recover it later. Unless you are eligible to defer their supplementary declarations, you will not be compelled to use postponed VAT accounting.
If your business is not VAT registered
If you are not VAT registered and receive goods from countries in the EU, your supplier will charge VAT at the local rate in the EU country from which the goods are supplied. You still have to pay the import VAT, but you will not be able to reclaim it.
If you’re a non-UK trader and not registered for UK VAT you can arrange for an agent in the UK to import and supply goods on your behalf. The agent’s supply of services to you will be at the standard rate of VAT which you will not be able to reclaim. But the agent will be able to recover the import VAT as input tax.
If you’re importing goods from outside the UK and EU that are destined for an EU country, you must either:
Pay UK import VAT and put the goods into free circulation OR place the goods to another customs procedure, for example transit or customs warehousing
If you pay UK import VAT, you may be able to obtain Onward Supply Relief.
If you plan to import any goods from countries outside the UK you will need to get an EORI (Economic Operator Registration and Identification) number to deal with customs authorities. You will need it when you supply information to customs authorities, for example when completing customs declarations.
Traders using Postponed Accounting will receive a monthly statement of all their imports where they opted to postpone the import VAT through the customs clearance paperwork. This should be reporting in the subsequent monthly or quarterly 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.
Traders can account for import VAT if:
- the goods you import are for use in your business
- you include your EORI number, which starts ‘GB’ on your customs declaration
- you include your VAT registration number on your customs declaration, where needed
If traders initially declare goods into a customs special procedure, they can account for import VAT on their VAT Return when they submit the declaration that releases those goods into free circulation from the following special procedures:
- customs warehousing
- inward processing
- temporary admission
- end use
- outward processing
- duty suspension
Traders can account for import VAT on your VAT Return when you release excise goods for use in the UK - also known as ‘released for home consumption’. This includes when goods are released from an excise warehouse after being in duty suspense since the point of import.
Import Consignments not exceeding £135
The UK's HMRC intends to require ecommerce sellers, or their facilitating marketplaces, to charge VAT at the point of sale on imported goods (consignments) not exceeding £135. This is instead of paying import VAT. At the same time, the existing VAT exemption on parcels not exceeding £15 will be removed.
You will not be able to account for import VAT on your VAT Return if you are authorised to use simplified declarations for imports and you complete your simplified frontier declaration before 1st January 2021.
This will be the case even if you complete your supplementary declaration after this date.
If you’re eligible to defer submitting your supplementary declarations for up to 6 months, you must account for import VAT on your VAT Return.
To complete your VAT Return, you willl need to use the record of imported goods that you make for customs purposes.
In the event of a no deal Brexit the UK government have announced they will introduce Postponed VAT Accounting (PVA) for both EU and non-EU imports by UK registered businesses.
This will enable VAT registered businesses to declare and recover import VAT on their VAT returns, rather than having to pay it upfront and subsequently recover it on their VAT return.
Registration will not be required for importers to use PVA. The intention to use PVA for an import will be declared on the customs entry.
This will come into effect from Day 1 of a no deal Brexit, however it will be optional. VAT can still be paid upfront if an importer wishes to do so.
C79 VAT certificates will not be issued for goods declared using PVA. Instead a monthly postponed import VAT statement will be made available for importers via the government digital service.
This statement will indicate the total VAT postponed for the previous month in order to declare this on the quarterly VAT return.
PVA currently does not exist in the UK. More details on this service will be published by the government in due course.
The currently allows two systems for import VAT deferral (standard deferral and SIVA).
SIVA (Simplified Import VAT Accounting) requires a lower level of financial security than standard import VAT deferral. We therefore suggest importers seek SIVA approval first. VAT registered businesses can apply for SIVA by opening this link.
Commercial arrangements: Individual commercial contracts and arrangements may alter the default legal responsibilities and requirements. Contractual obligations for international commercial transactions are outlined in the Incoterms rules, which are administered by the International Chamber of Commerce.
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AEO certified & with years of experience in handling customs formalities, Spatial Global have the knowledge and expertise to assist clients in submitting export & import declarations. We access customs directly via our operating system, processing and transmitting numerous entries every day. Simply get in touch with us & we’ll help find the most appropriate solution to meet your specific requirements.
As an EU certified AEO customs operator in many European countries you don’t have to be a customs specialist yourself – leave it to us. Simply get in touch with us and we’ll handle your customs declarations in your own language and in due time.
Information published here is correct, to the best of our knowledge and belief, at the time of publishing but we take no responsibility in the event of incorrect or misleading information. This service is provided free of charge and without liability or obligation.