The UK officially left the EU Single Market and Customs Union and as such, import VAT is now due on imports of goods from the EU into Great Britain, following the same rates and structures that are applied to imports from the rest of the world.
Between the 1 January 2021 and 1 July 2021, the UK will be introducing controls on goods imported from the EU in three different stages. This means that there will be an option to defer customs declarations for standard goods during this period.
Duty deferment accounts
If you import goods regularly, you may want to apply for a Duty Deferment Account, which can be beneficial for your cash flow.
This account will allow you to pay customs duty, excise duty, and import VAT once a month through Direct Debit instead of being paid on individual consignments at the point of import.
UK VAT registered traders can instead account for import VAT on their VAT return using postponed VAT accounting, as detailed below.
If you want to set up a Duty Deferment Account, you need to apply for a deferment account number (DAN) and you need to be authorised by HMRC. The government has announced that new rules are being introduced to allow businesses to use duty deferment without what is called a ‘Customs Comprehensive Guarantee’ (CCG) This simplification will, however, not apply to businesses with a poor compliance history.
Postponed VAT Accounting
This is a new scheme introduced from 1 January 2021 by the UK government which enables all VAT registered traders to account for import VAT on their VAT return.
As a UK VAT registered importer, you will be able to use postponed VAT accounting, however unless you are eligible to defer your supplementary declarations, you will not be compelled to do so. This is an automatic scheme, there is no need to apply for it according to HMRC.
This means you will need to account for import VAT on your periodic UK VAT return which includes the date you imported the goods. To do this, you will need to estimate the import VAT due from the records of imported goods you are required to keep. When you submit your deferred declaration, you must adjust this estimate to precisely account for the import VAT due on a later VAT return.
With Postponed VAT Accounting, VAT payments can be deferred using a duty deferment account as outlined above.
Non-VAT registered traders (and any VAT registered traders not using postponed VAT accounting) have the same options available to report and pay import VAT as they do for customs duties. They will need to report and pay import VAT through the customs processes.
Lastly, UK VAT registered businesses using Deferred Declarations and who are eligible to defer their supplementary declarations must use Postponed VAT Accounting.
What information will be required to submit your UK VAT return?
In order to complete your VAT return when using Postponed VAT Accounting, you will need the following import details:
- All customs entries made in your commercial records
- Copies of your monthly postponed import VAT online statement which will be generated in the first half of each month.
Postponed import VAT should always be accounted for on the VAT return for the taxable period which covers the date when you imported goods into the UK.
Rules to reclaim any input VAT will continue to apply and all information needed to support a VAT reclaim will be included in the monthly statements made available to you.