One of the biggest changes impacting businesses after the end of the Brexit transition period on 31 December 2020 is that goods brought into Great Britain (GB) from the EU will become classified as imports. This would ordinarily mean that import VAT would become due on or soon after the goods arrive at the UK border, or on release of the goods into free circulation (although payment can currently be deferred to the fifteenth of the following month by using a duty deferment account).
In order to remove this cashflow cost for businesses, from 11pm on 31 December 2020 VAT registered importers will be able to account for import VAT on their VAT returns by using postponed VAT accounting (PVA).
How will PVA work?
PVA will enable importers to account for and recover import VAT as input tax on their VAT return, rather than having to pay it upfront and recover it on a subsequent return using a C79 VAT certificate.
It may be used for goods imported into GB (England, Scotland and Wales) from anywhere outside the UK and for goods imported into Northern Ireland from outside the UK and EU. Goods that move from the EU to Northern Ireland will not be treated as imports.
No prior authorisation will be required to use PVA. VAT registered businesses will simply make the appropriate entry and provide their GB EORI and/or VAT registration number (VRN) on their customs declaration. This process (subject to customs clearance) will allow the goods to enter free circulation without up-front payment of the import VAT. The customs declaration will generate an online monthly postponed import VAT statement (MPIVS) that will be the evidence required to account for and recover the import VAT as input tax on their next VAT return. C79 certificates will continue to be produced for those entries where any VAT is still paid on importation, i.e. for when PVA is not used.
PVA will only be available on declarations where import VAT would ordinarily be due and where goods are being declared into free circulation. Where goods are placed into a customs special procedure, PVA will be available on the declaration that removes them from that special procedure and places the goods into free circulation.
For importers who from 1 January 2021 opt to defer their customs declarations by up to six months from the point of import, it will be compulsory to use PVA to account for import VAT on imports of standard (non-controlled) goods.
What needs to be put on the customs declaration?
If an importer uses HMRC’s customs handling of import and export freight (CHIEF) system to make their customs declarations, the importer will be able to use PVA by inserting their GB EORI number into box 8 (header consignee) of the C88 import declaration. They will also need to enter the method of payment code ‘G’ in box 47e.
HMRC’s view is that it is only the owner of the imported goods, whose details (EORI) should be shown in box 8 of the import declaration, who is eligible to reclaim the import VAT, i.e. only the owner of the goods at the time of import may use PVA.
If an importer uses HMRC’s electronic customs declaration service (CDS) to make their import declarations, they will be able to use PVA by simply quoting their VRN.
For customs intermediaries submitting declarations on behalf of an importer, the EORI or VRN must be that of the importer. Import VAT will not be able to be postponed against the intermediary’s account on behalf of an importer. n
One of the biggest changes impacting businesses after the end of the Brexit transition period on 31 December 2020 is that goods brought into Great Britain (GB) from the EU will become classified as imports. This would ordinarily mean that import VAT would become due on or soon after the goods arrive at the UK border, or on release of the goods into free circulation (although payment can currently be deferred to the fifteenth of the following month by using a duty deferment account).
In order to remove this cashflow cost for businesses, from 11pm on 31 December 2020 VAT registered importers will be able to account for import VAT on their VAT returns by using postponed VAT accounting (PVA).
How will PVA work?
PVA will enable importers to account for and recover import VAT as input tax on their VAT return, rather than having to pay it upfront and recover it on a subsequent return using a C79 VAT certificate.
It may be used for goods imported into GB (England, Scotland and Wales) from anywhere outside the UK and for goods imported into Northern Ireland from outside the UK and EU. Goods that move from the EU to Northern Ireland will not be treated as imports.
No prior authorisation will be required to use PVA. VAT registered businesses will simply make the appropriate entry and provide their GB EORI and/or VAT registration number (VRN) on their customs declaration. This process (subject to customs clearance) will allow the goods to enter free circulation without up-front payment of the import VAT. The customs declaration will generate an online monthly postponed import VAT statement (MPIVS) that will be the evidence required to account for and recover the import VAT as input tax on their next VAT return. C79 certificates will continue to be produced for those entries where any VAT is still paid on importation, i.e. for when PVA is not used.
PVA will only be available on declarations where import VAT would ordinarily be due and where goods are being declared into free circulation. Where goods are placed into a customs special procedure, PVA will be available on the declaration that removes them from that special procedure and places the goods into free circulation.
For importers who from 1 January 2021 opt to defer their customs declarations by up to six months from the point of import, it will be compulsory to use PVA to account for import VAT on imports of standard (non-controlled) goods.
What needs to be put on the customs declaration?
If an importer uses HMRC’s customs handling of import and export freight (CHIEF) system to make their customs declarations, the importer will be able to use PVA by inserting their GB EORI number into box 8 (header consignee) of the C88 import declaration. They will also need to enter the method of payment code ‘G’ in box 47e.
HMRC’s view is that it is only the owner of the imported goods, whose details (EORI) should be shown in box 8 of the import declaration, who is eligible to reclaim the import VAT, i.e. only the owner of the goods at the time of import may use PVA.
If an importer uses HMRC’s electronic customs declaration service (CDS) to make their import declarations, they will be able to use PVA by simply quoting their VRN.
For customs intermediaries submitting declarations on behalf of an importer, the EORI or VRN must be that of the importer. Import VAT will not be able to be postponed against the intermediary’s account on behalf of an importer. n
