From 1st January 2021, all VAT registered businesses that import goods into the UK from anywhere in the world have been able to use postponed VAT Accounting. This provides the option to account for the VAT charge and recovery on the same VAT return, and even applies if your business was already importing goods into the UK.
The purpose of postponed VAT accounting is to help businesses avoid the negative cash flow impact that importing goods into the UK can have. This occurs when import VAT is paid at the point the goods enter the UK and not reclaimed until the next VAT return, which can be months later. Postponed VAT accounting also avoids businesses having goods held at Customs until the import VAT due is paid.
Postponed VAT Accounting differs from the existing duty deferment account treatment, which allows you to pay customs duty, excise duty and import VAT once a month via Direct Debit instead of being paid on each individual consignment at the point of import.
To get the benefit of using postponed VAT accounting you need to:
Sign up to HMRC’s customs declaration service
Elect to use postponed accounting on the customs declaration
Download your monthly import VAT statements
Enter the values from your monthly import VAT statements into your VAT Return.
As there are cash flow benefits to postponed VAT Accounting, we believe it is likely to become the common way businesses account for import VAT going forward.
Users preparing their VAT returns on Xero’s MTD or new Non-MTD VAT report canapply Postponed VAT Accounting (PVA) adjustments to their VAT Returns. The adjustment menu directs you to select a monthly period and enter the Monthly Postponed Import VAT Statement amount before saving the details. This removes the need for complex accounting transactions to be created and ensures the adjustments are correctly recorded on your VAT return.
