Duty Deferment

Duty Deferment and Import VAT Payments

January 10, 2021 in Ecommerce Tips

What you need to know about deferring your customs declarations and import VAT payments. 

What are Duty Deferment Accounts?  

If you import goods 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 and excise duties and import VAT monthly via Direct Debit. This would save you paying for each individual consignment at the point of import. UK VAT registered traders can account for import VAT through their VAT return. This uses postponed VAT accounting, as detailed below. 

Since leaving the EU Single Market and Customs Union, import VAT is now due on imports of goods from the EU into the UK. This follows the same rates and structures applicable to imports from the rest of the world.  

How do I set up a Duty Deferment Account?  

To set up a Duty Deferment account, you will need to apply for a Duty Deferment account number (DAN). You will also need HMRC to authorise this. The government has also introduced rules allowing businesses to use Duty Deferment without a Customs Comprehensive Guarantee (CGG). This will not apply to businesses with poor compliance history.  

Please note: VAT treatment of imported goods will differ depending on whether consignments exceed £135 when sold to UK customers. 

What is 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 can use postponed VAT accounting. If you are eligible to defer your supplementary declarations however, you may not need 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 report import VAT via your UK VAT return, including dates of importation. To do so, you will need to estimate the import VAT due from your records of imported goods. When you submit your declaration, this import VAT estimate must be as precise as possible to record on your later VAT return. 

With Postponed VAT Accounting, you can defer VAT payments by using a duty deferment account as outlined above. 

Non-VAT registered traders and any VAT registered traders not using postponed VAT accounting will need to report and pay VAT through customs processes.  

Lastly, UK VAT registered businesses using Deferred Declarations and those who are eligible to defer their supplementary declarations must use Postponed VAT Accounting.  

What information will be required to submit your UK VAT return?  

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 

You should always report postponed import VAT via the VAT return covering the date when you imported the goods into the UK. 

Rules to reclaim any input VAT will continue to apply. All information needed to support a VAT reclaim will be included in the monthly statements made available to you.  

Need to know more? 

If you need to discuss your specific situation or learn more on this topic, our Consultancy service can ensure you receive tailor-made VAT advice. Contact us today. 

This information was accurate at the time of publishing: 10/01/2020

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