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Introduction to Postponed VAT Accounting

Updated: Aug 3, 2023

Businesses can declare and recover import VAT in their

Introduction to Postponed VAT Accounting

Businesses can declare and recover import VAT in their regular VAT returns using Postponed VAT Accounting (PVA). The system was implemented in January 2021 because businesses importing from the EU would have experienced negative cash flows if the Reverse Charge mechanism had not been implemented.

What is Postponed VAT Accounting?

Importers were required to pay VAT on goods entering the UK after the UK officially left the EU on January 1st, 2021 if the value of the items exceeded a specified threshold. The postponed VAT accounting scheme was created by the UK government to help businesses avoid negative cash flow by deferring VAT payments. 

Commercial goods over £135 entering the UK would be kept at customs until the VAT was paid if the VAT was not postponed. Instead of paying the import VAT right away, firms can now report it on their quarterly VAT Return and defer payment. While the end result is the same, businesses are exempt from paying import VAT until they sell or resell their products.

In short, the PVA scheme allows you to 

  1. defer payment of import VAT by 

  2. accounting for it in your normal VAT filings and 

  3. reclaiming it in your regular VAT returns. 

Who can use Postponed VAT Accounting?

You must be a UK VAT registered business that imports products for business purposes into the UK to be eligible to use the postponed VAT accounting scheme. Since it is an optional scheme, you can pay the VAT right away if you like. You do not require authorisation to postpone the VAT; if you are VAT registered, you can use this system right away.

A company may be needed to demonstrate the viability of its activities as well as its ability to pay its VAT obligations. All imports into the UK from outside the UK are subject to postponement. Because Northern Ireland is still part of the EU VAT region, it has its own set of laws. 

How to apply Postponed VAT on your Customs declaration?

You must indicate this on your customs declaration if you choose to employ the postponed VAT accounting system. Most businesses hire a transporter or a customs specialist to file customs declarations since they can be complicated.

If you want to postpone the VAT, fill in the following fields on the customs declaration:

To use PVA on Customs Declaration Service

You must include your VAT registration number in data element 3/40 at the header level (method of payment G should not be used in data element 4/8).

VAT will only be recorded at the declaration level against your EORI. You may face delays or penalties if your customs declaration is erroneous or lacking the above information. Make sure that you keep records of your customs or VAT declarations for at least 6 years.

How to show Postponed VAT on your VAT Return?

You must declare VAT on your VAT Return if you have deferred VAT on your imports. The CDS customs system allows you to get your VAT statement, which includes deferred VAT payments for a given time. Once you have your statement, you can include those figures in the following boxes on your VAT Return:

  1. Box 1: Include the VAT due from postponed VAT accounting

  2. Box 4: Include the VAT reclaimed on imports from the postponed VAT scheme

  3. Box 7: Include the ex-VAT value of imported goods

You will only input the figures in boxes 4 and 7 if you choose not to employ the postponed VAT plan for some imports. To avoid penalties and mistakes, it is critical to accurately enter the postponed VAT on your VAT Return.

What happens if you import goods in consignments valued at £135 or less?

The treatment of goods in consignments worth less than £135 is governed by different laws.

Find out about the treatment of VAT for imported goods sold:

  1. to customers in the UK using online marketplaces

  2. directly to customers in the UK

The import of excise goods is exempt from these requirements. You have the option of including import VAT in your VAT return for the import of consignments of excise goods of any value.

What is the next step?

If you have selected that you are accounting for import VAT on your VAT Return on your customs declaration you will need to account for import VAT when you complete your VAT Return.

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