Postponed VAT accounting from 1 January 2021

The introduction of postponed VAT accounting means that there are some changes to the way in which you will complete your VAT return from 1 January 2021.

Previously VAT on imports had to be paid up-front before release from Customs which would result in a negative cash flow impact for businesses.  To avoid this, HMRC have set up the Postponed VAT Accounting scheme.

The purpose of postponed VAT accounting is to avoid an impact to your cash flow when importing goods.

Previously VAT on imports had to be paid up-front before release from Customs which would result in a negative cash flow impact for businesses.  To avoid this, HMRC have set up the Postponed VAT Accounting scheme.

Under postponed VAT accounting, you declare and recover VAT on the same VAT return. This is beneficial as it means that you do not have to pay the VAT upfront and recover it later.

You can use postponed VAT accounting from 1 January 2021 if your business is registered for VAT in the UK and you import goods into Great Britain from anywhere outside the UK or into Northern Ireland from outside the UK and the EU.

Note - There are no changes to the VAT treatment of goods moved between Northern Ireland and the EU, or in the way in which the VAT is accounted for.

You can account for import VAT on your VAT return if:

• you import goods for use in your business;
• you include your EORI number, which starts with ‘GB’ on your customs declaration;
• you include your VAT number on your customer’s custom declaration (if applicable).

You will need to download a monthly statement which shows the total import VAT postponed for the previous month which you will need to include on your VAT return. There are also changes to what you need to enter in Boxes 1, 4 and 7.

• In Box 1, include the VAT due in the period on imports accounted for through postponed accounting
• In Box 4, include VAT reclaimed in this period on imports accounted for through postponed accounting
• In Box 7, include the total of all imports of goods shown on your online monthly statement, excluding any VAT

If you import goods into Northern Ireland from outside the UK and EU in consignments valued at £135 or less, and you provide your VAT registration number to the supplier, you must account for import VAT on your VAT Return. When you complete your customs declaration you must select that you’ll be accounting for import VAT on your VAT Return.

Note - Where the value of the consignment is less than £135, VAT will be collected at the point of sale rather than at the point of importation.

Helpful Links

• HMRC information on Postponed VAT Accounting
• Get access to the Customs Declaration Service
• Get an EORI (Economic Operators Registration and Identification)number for the movement of goods