Give your Cashflow a Big Boost with Postponed VAT Accounting

Since the end of the Brexit transition period, the VAT has become payable on imports coming into the UK from anywhere in the world including the imports from the EU if they are over £135 in value. To provide relief to businesses and keep the good inflow smooth the government introduced a new scheme called “Postponed VAT Accounting” is to avoid an impact on your cash flow when importing.

If your business imports from outside the UK then it might see cash flow benefits because it removes the need to pay import VAT in advance to HMRC.

So, how can I get the benefit of not paying for VAT on imports? Good thing is that there isn’t an application process for Postponed VAT Accounting, and you do not need to tell HMRC in advance. All you need to do is confirm with your logistics partner that you plan to use Postponed VAT Accounting and they will declare it on your behalf in the customs declaration to HMRC.

The use of the scheme is optional and you can still choose to pay the VAT upfront when the goods enter the UK. If you keep to this option, you will be still required to obtain monthly C79 reports from HMRC before claiming back in your VAT return. The way this scheme work is very similar to the reverse charge mechanism that was used for EU trade before Brexit. Rather than physically paying import VAT and then reclaiming it on the subsequent VAT return, the VAT is accounted for as input and output VAT on the same return. The outcome is the same but the importer has avoided the physical payment.

Reverse charge is a mechanism for accounting for VAT whereby the customer charges themselves VAT, rather than the supplier charging VAT. As the reverse charge makes it the customer’s responsibility to account for VAT there is no opportunity for the supplier to disappear without paying the VAT to HMRC.

Postponed VAT accounting can be used by all VAT-registered businesses in the UK, although businesses in Northern Ireland continue to be considered part of the EU VAT area, so goods arriving from the EU will not be considered imports and will therefore not incur import VAT. However, businesses in Northern Ireland can still use postponed VAT accounting for imports from non-EU countries.

What do I need to do to report on my custom declarations? All you need is your EORI number starting with ‘GB’ which includes your VAT registration number and 3 zero at the end. HMRC usually provides anyone requesting an EORI number in 48 to 72 hours.

There are no negatives when it comes to making use of postponed VAT accounting, so there can be few if any objections within most businesses. Are you spending more time sorting out VAT needs for your company? Why not let the experts handle this for you. Contact us for a free consultation.