Deferred accounting for VAT on imports

Also known as “postponed accounting”, the above scheme was introduced from 1 January 2021 to help mitigate the cash flow impact of Brexit on businesses that buy goods in from the EU.

Prior to 1 January 2020, when an intra-EU supply of goods was made to a customer in the UK, subject to certain conditions being met, the UK customer was not be charged VAT. The UK customer would account for VAT on the acquisition on their UK VAT return and could reclaim the VAT as input tax subject to the normal rules.

Since January 2021, the UK is no longer part of the EU VAT Territory. Movements of goods from suppliers in the EU are no longer treated as EC acquisitions and are instead treated as imports.

VAT is a tax on importation, and previously import VAT had to be paid when the imported goods entered the UK, before they were released by customs.  The importer would obtain a C79 certificate to show the amount of import VAT paid, and would use this certificate to substantiate any input tax reclaim on the VAT return for the period that covered the date of importation. 

It could therefore take months to recover the import VAT, so the government introduced the postponed accounting scheme to counter this cash flow issue.  The scheme applies to imports from all over the world, not just those from EU suppliers. Customs declarations and the payment of any other duties are still required.

Upfront import VAT not paid, and the importer accounts for import VAT on the VAT return.

It is possible to use the scheme if:

• The goods imported are for use in the business
• The importer’s EORI number is included on the customs declaration
• The importer’s VAT registration number is included on the customs declaration.

Separate rules apply to imports where the consignment does not exceed £135 in value.

To complete the VAT return, importers are able to access an online statement that shows the import VAT paid. VAT on imports is included in Box 1 of the return, and reclaimed in Box 4 according to the normal rules.

HMRC have published guidance on when postponed accounting can be used and how to account for import VAT in the VAT return.

The VAT impact of Brexit is just one of the topics covered in our series of courses on “Understanding the impact of Brexit”.