Commentary

V3.305 Accounting for import VAT—postponed accounting; payment of import VAT in other circumstances

Part V3 Supplies, acquisitions and imports

V3.305 Accounting for import VAT—postponed accounting; payment of import VAT in other circumstances

V3.305 Accounting for import VAT—postponed accounting; payment of import VAT in other circumstances

Postponed VAT accounting

In Spring Budget 2020, it was confirmed that postponed VAT accounting would be introduced for imports at the end of the implementation period1.

The abolition of acquisition VAT as a result of Brexit could have had a serious cash-flow impact on UK businesses importing goods from EU member states in that, as a general rule, VAT is treated as import duty and therefore becomes payable prior to release of the goods from customs control. This import VAT is then, subject to the normal rules, recoverable as input tax via the VAT return; a process which might take several months. The introduction of postponed VAT accounting (largely) avoided this cash flow impact for importers of goods from the EU (where a form of postponed accounting was already in place for acquisition VAT), and provided a cash-flow benefit for importers of goods from other countries (where postponed accounting did not formerly apply).

Further guidance2 was subsequently published setting out at a high level when a person is entitled to use postponed accounting, ie:

  1.  

    •     the goods must be imported for use in the business

  2.  

    •     the business must include its VAT registration number on its customs declaration

SI 2019/60 sets out the legal provisions for the introduction of postponed accounting with effect from IP completion day3. These regulations also amend the parts of SI 1995/2518 which deal with VAT to be accounted for on returns (see V5.103) in the

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