In a post-Brexit Britain, SMEs find themselves subject to import VAT on all goods worth more than £135 bought from EU companies as well as those outside the EU.
Traditionally, businesses paid import VAT either as the goods reach the border, or via a Duty Deferment account. This was a post-Brexit measure that required companies to receive a C79 certificate from HMRC each month to confirm the import VAT paid, before reclaiming it. This inevitably had implications on businesses’ cashflow, while they waited to receive the C79.
Postponed VAT Accounting
However, did you know that you can postpone payment of import VAT accounted for on your VAT return? Initially introduced to mitigate the impact of Brexit on businesses, Postponed VAT Accounting (PVA) removes the cash-flow implications of purchasing goods that incur import VAT.
PVA allows you to declare and reclaim your import VAT all on the same VAT return, rather than paying upfront when the goods are imported.
If your business is UK-based and VAT-registered, then you can use PVA for goods imported into Great Britain from outside the UK, and Northern Ireland from outside the UK and EU. These goods must be imported for use in your business that you have the right to dispose of and include your VAT registration number on the import declaration.
Whether you pay and reclaim VAT straightaway, or postpone the payment, it all must be recorded through your VAT return.
How do you use PVA?
You will need to subscribe to Customs Declaration Service to access your monthly PVA statements from HMRC. To do this, you’ll need to log in using the Government Gateway user ID and password that you use for your business, and tell HMRC the following information:
- Your EORI number
- Your Unique Taxpayer Reference (UTR)
- Your business address/addresses registered with HMRC
- Your national insurance number (if you’re an individual or sole trader)
- The date you started your business.
Each month, you should retrieve the PVA statement and retain it for your records – it’s only accessible for 6 months, so we’d recommend printing or saving it for future reference. The PVA monthly statements provide valuable information for filing your VAT return. You will need to input the total import VAT due for the period in box 1, the amount of import VAT you’re entitled to reclaim in box 4, and the total value of imported goods in the period in box 7.
If you use Xero’s accounting software, then this is a much simpler process. If you select the button, ‘Apply Postponed VAT Accounting (PVA) adjustments’, then all you need to do it enter the month, amount, any other details you think are necessary, and attach the statement. This will then automatically add your information into the correct boxes outlined above!
Using Postponed VAT Accounting for foreign goods is an efficient way to optimise cash flow for your business, while ensuring that you satisfy your VAT obligations. For further guidance on how your business could implement PVA, please contact a member of our team on 01942 816 512, or via email:
Dawn Wood, Audit and Accounts Supervisor: [email protected]