Getting to grips with Postponed VAT Accounting...
Over the past year, the topic which has generated the most questions and discussion on our VAT and Customs courses is Postponed VAT Accounting (PVA).
UK imports are zero rated by the supplier, but import VAT is charged by HMRC at the point of import on the value of the goods including customs duty and incidental costs. Payment of the import VAT can be delayed, reducing the impact on a business’ cash flow.
How can you avoid paying import VAT at the time of import?
To avoid paying import VAT upfront and subsequently reclaiming it, importers can make use of two options. The first is a Duty Deferment Account, which allows importers to delay payment of duty and VAT until the 15th day of the next month. A better option for many businesses is to account for import VAT on the VAT return using Postponed VAT Accounting. This means declaring VAT as an output and input on the same VAT return, with clear cash flow benefits. Although in theory it is a simple process, in practice there is still lots of confusion on when it can be used and exactly how it operates.
When can you use Postponed VAT Accounting (PVA)?
Although it was introduced as a result of leaving the EU, PVA can be used for imports from anywhere in the world. It is a permanent option and you don’t need to be authorised to use it. It is critical that you communicate clearly with your agents and intermediaries if you wish to use it.
It’s also worth noting that PVA is mandatory for businesses that delay customs declarations.
How can UK Training help?
We have a brand-new 90 minute webinar which focuses exclusively on Postponed VAT Accounting. The course will not only guide you through the technical aspects of PVA, but will also provide clarity on the many practical challenges businesses have been having when trying to use the new process. We have live online dates coming up and an on-demand version will be available soon. You can find more details here.