Is your company importing goods into Britain from outside the UK, or into Northern Ireland from outside the UK & EU? You could benefit from postponed VAT accounting (PVA).
Since the start of this year, VAT is due on imports to the UK if the cost of these imports is over £135. This applied worldwide, and not just for EU imports. However this could cause significant cashflow disruption for some businesses, and so that’s why the PVA system has been introduced.
What Is PVA?
PVA allows you to account for the VAT due on imports on your VAT return instead of paying it right away at the port of entry. By doing this companies can avoid the immediate impact to cashflow that would be caused if VAT had to be paid at point of import.
Businesses who import from the EU will be used to accounting for VAT in their VAT returns pre Brexit, and the PVA system allows this style of accounting to continue to avoid business disruption. Additionally, PVA is applicable to imports outside the EU, so some businesses may gain an extra benefit in terms of simplifying VAT and cashflow by using this for all imports.
How Do I Use PVA?
PVA is optional, you can simply pay VAT at the point of import it that suits your business better. If you would like to delay the VAT payment on imports you will need to account for the VAT on your VAT returns and to do this you will need access to monthly Customs Declaration Statements (CDS). You need to subscribe to receive CDSs.
To subscribe to CDS you will need access to the following:
- Government Gateway user ID and password
- Economic Operator Registration and Identification (EORI) number that starts with GB
- Unique Taxpayer Reference (UTR)
- Business address
- National Insurance number – if they are an individual or sole trader
- The date you started your business
Once you are receiving monthly a CDS you will need to make changes to the way you complete your VAT return. See the following advice from HMRC:
- Box 1 – Include the VAT due in this period on imports accounted for through postponed VAT accounting. You’ll be able to get this information from your online monthly statement, or you must estimate the amount if you do not have a statement and have delayed your customs declaration.
- Box 4 – Include the VAT reclaimed in this period on imports accounted for through postponed VAT accounting. You must estimate the amount if you do not have a statement and have delayed your customs declaration.
- Box 7 – Include the total value of all imports of goods in this period, not including any VAT.
If you are using accounting software such as Quickbooks, Sage, Xero, or FreeAgent you may need to make changes to your settings to accommodate PVA accounting in regards to completion of your VAT returns online. If you have any issues regarding accounting software and PVA please reach out to your provider or your accountant for assistance.