Guide

What is postponed VAT accounting?

We explore the ins and outs of postponed VAT accounting and how it can help small businesses importing goods into the UK

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What is postponed VAT accounting?

Companies in the UK have to pay import VAT on goods worth more than £135. Since Brexit, this now has to be paid on goods imported from the EU, too.

The Government introduced the postponed VAT accounting (PVA) system to help businesses with this change and lessen the impact that import VAT has on cash flow.

Rather than paying VAT on goods at the border and reclaiming it on your VAT return, the scheme allows you to ‘postpone’ the import VAT. You don’t need to make a physical payment for the goods at the UK border. Instead, you’ll account for the import VAT and recover it on the same VAT return. It is similar to the previous EU Reverse Charge mechanism.

Besides helping with cash flow, postponed VAT accounting avoids goods being held in customs until VAT is paid.

Who can use the postponed VAT accounting scheme?

Any business registered for VAT in the UK can use postponed VAT accounting (PVA). You don’t need to apply or get permission, and can begin immediately.

You must be importing goods for use in your business. Check the full eligibility requirements for PVA.

Businesses in Northern Ireland are still considered part of the EU VAT area, so do not need to pay import VAT on goods imported from the EU. The reverse charge will still apply. Northern Ireland businesses can use postponed VAT accounting for imports from elsewhere in the world.

The PVA scheme is optional. If you’d prefer, you can pay VAT upfront at the border. If you do this you need to get monthly C79 reports from HMRC.

How does PVA work?

To use Postponed VAT Accounting, your business needs to be registered for the Customs Declaration Service.

To use PVA when you import goods, the person completing the customs declaration form for your goods needs to include the following information:

Your EORI (Economic Operators Registration and Identifier) number

  • Your UK VAT registration number (VRN)
  • A ‘G’ in box 47e for the method of payment for import VAT.

If you use postponed VAT accounting, instead of a C79 document, you will get an online schedule of imports to download monthly.

How do I complete my VAT return if I use PVA?

If you have postponed the import VAT on your customs declarations you need to account for the VAT on your VAT Return. You must do this for the accounting period which covers the date you imported the goods.

To complete your VAT return you’ll need to get a copy of your monthly postponed import VAT statement (MPIVS) from HMRC. These are usually available to view by the 6th working day of the month. Each statement shows the total import VAT postponed for the previous month. These will become an important part of your VAT records. You should download them, cross-check them with your own records and keep copies.

You’ll need to complete the following three boxes on your VAT return:

Box 1

Include the VAT due in this period on imports accounted for through postponed VAT accounting. This information will be on your monthly statement.

Box 4

Include the VAT reclaimed in this period on imports accounted for through postponed VAT accounting.

Box 7

Include the total value of all imports of goods in this period, excluding any VAT.

How can postponed VAT accounting help small businesses?

Well managed cash flow is vital for running a successful small business, and postponed VAT accounting can help with this.

Xero’s cloud accounting software also makes it simple to stay on top of your cash flow. Xero’s dashboard gives you a real time view of your business finances so you can make smart decisions.

Xero’s Making Tax Digital compliant software also makes VAT a breeze, with built in PVA functionality to make postponed VAT accounting simple.

Find out more about how Xero can help you run a healthy business — including getting you MTD ready.

Disclaimer

Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the provided content.

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