Understand the Concept Postponed Accounting for UK Import VAT
With the end of the Brexit transition period, there are changes that businesses subject to VAT must take into account. The changes include the introduction of a deferred VAT settlement for importers registered for VAT. In this guide, we explain what deferred accounting is, why it exists now, and how to use it.
UK VAT companies can use deferred accounting to reclaim import VAT on goods over £ 135. This means that companies subject to VAT can declare import VAT on their VAT return instead of paying it upfront at the border. Different VAT payment rules apply for shipments under £ 135.
Can Northern Ireland Businesses use Deferred Accounting?
Businesses registered for VAT in Northern Ireland can use deferred declarations for imports from outside the UK and the EU. VAT and the way businesses charge it won't change as goods move between Northern Ireland and the EU.
Why Has the Government Introduced Deferred Accounting?
The EU has special VAT regulations, which aim to promote trade between member states. After the Brexit transition period, Great Britain is no longer a member of the EU's VAT area. This means UK businesses will now have to pay import sales tax when importing goods worth over £ 135, even if importing from the EU. This applies in addition to any customs and excise taxes that may apply.
The government introduced deferred accounting to help businesses adjust to change. In doing so, deferred accounting is designed to reduce the impact that import sales tax can have on a business's cash flow.
How Does the VAT Deferral Reservation Work?
Instead of paying import sales tax on goods at the border and claiming it on your next sales tax return, you are “deferring” the import sales tax. This means that you must account for and reclaim import sales tax, all on the same sales tax return. You do not have to physically pay import sales tax when your products reach the UK border.
Do I Have to Pay Customs Duties for Deferred Invoicing?
The deferred settlement only deals with import sales tax, so you will continue to pay customs duties on the goods you import. The rights can be deferred on the monthly payments. To do this, the business must register with HMRC for a tax deferral account.
Do I have to Change my VAT Registration to Use Deferred Import VAT settlement?
You do not need a separate permit to report import sales tax on your sales tax return. Just make sure that:
● Your business is registered for VAT.
● They import products that you will use in your business.
● The customs declaration contains both your tax identification number and the EORI number.
You need an EORI number to move goods between the UK (Wales, Scotland, and England) and other countries.
Deferred Accounting and Special Procedures
Deferred settlement is also possible if you use 'special procedures' to import into the UK and provide customs clearance for your goods.
The special procedures are:
● Customs warehouse.
● Active improvement.
● Temporary admission.
● Passive improvement.
● Suspension of service.
Should Companies Subject to VAT use Deferred Accounting?
Deferred settlement is optional in most cases, so you can pay the import sales tax upfront at the border if you want. If you delay customs declarations, deferred accounting is required.
Can I Claim Import Sales Tax Without Having to Postpone Accounting?
If your business is registered for sales tax, you can still claim the import sales tax you pay on the side of your sales tax return. You need a C79 certificate showing the import sales tax you paid. The origin of your certificate depends on how you submit your customs declarations.