Postponed import VAT accounting

15 Sep 2020

stack of money

Postponed import VAT accounting is being introduced from 1 January 2021, as a measure to help UK purchasers of goods from the EU with their cash flow. At the end of the Brexit transitional period (31 December 2020), goods arriving from the EU will be imports and subject to import VAT, duties and customs controls, where applicable.

Import VAT is currently payable at the time of customs declaration, unless the importer has a deferment account in place with HMRC. Many importers take advantage of deferment accounts owned by freight agents but many have to pay import VAT in order to have their goods cleared through customs. There is then a wait of several months depending on the timing before the import VAT can be reclaim through a VAT return thus creating a cash issue. The postponed import VAT accounting which will be introduced from 1 January 2021 is available in respect to all imports and not just those from the EU.

Postponed import VAT accounting does not need to be applied for – it is a measure that can simply be implemented, provided:

  • the goods being imported are for use in the business of the importer
  • the importer includes its UK issued EORI number (with the ‘GB’ prefix) on the customs declaration
  • the importer includes its VAT registration number on the customs declaration, where needed

Postponed import VAT accounting is not available for those importers authorised to use simplified declarations for imports and when the simplified frontier declaration is completed before 1 January 2021.

The introduction of postponed import VAT accounting is a welcome step by the Government. Similar provisions have been in place within certain EU Member States making them attractive locations to import goods into, but they do require licences and certain registrations before importers can postpone their import VAT payments. The UK measures appear simpler in terms of initial administration and only require the importer to have an EORI number and VAT number, as far as registrations are concerned.

HMRC has published guidance on how the import VAT is to be reported on the VAT returns, here.