Postponed VAT accounting, Brexit and the curious case of the Northern Ireland border
Postponed VAT accounting sounds a bit like procrastination, doesn’t it? But it’s actually designed to make your cash flow smoother, VAT simpler and Brexit less of a shock to the system for UK-based businesses.
Put simply, rather than paying your VAT on imported goods at the border, you can postpone the payment until you do your quarterly VAT return. Pretty useful if you’re a small to medium-sized business ordering in bulk and don’t fancy paying 20% before you’ve even sold anything.
Let’s take a closer look at how postponed VAT on imports works, how to organise your postponed VAT accounting monthly statement and whether you’re eligible for this VAT scheme.
We’ll also delve into the current rules around trade at the Northern Ireland border, but make sure you check HMRC’s website for the latest on this fast-moving situation.
How does postponed VAT accounting work?
If you’re a VAT-registered company importing over £135 worth of stock you’ll have to pay import VAT. But rather than immediately paying when your goods are at the port of entry, the government gives you the option to postpone VAT on imports until you submit your VAT return.
The government introduced postponed VAT accounting, also known as PVA, on the 1st of January 2021 for three key benefits:
- To support businesses through Brexit
- To improve businesses' cash flow
- To stop goods being held in customs whilst waiting for VAT payment
Postponed VAT accounting is similar to the pre-Brexit EU reverse charge, but PVA can be applied to goods from anywhere in the world.
There are two steps businesses need to follow to use postponed VAT accurately.
1. State it on your customs declaration
Make sure you fill in your Economic Operators Registration and Identification number (EORI) and UK VAT number (VRN).
You’ll then need to fill in box 47e with a “G” so customs are aware you’re using postponed VAT accounting. If you’re using a transporter or customs agent to help you with imports make sure you’ve discussed whether you’re going to use the PVA scheme with them, so you’re on the same page about when you’re paying HMRC that 20%.
2. Sign up to the customs declaration service to access your Monthly Postponed Import VAT Statement (MPIVS)
If you’ve filled in that little box with a ‘G’ HMRC will begin to generate a monthly postponed import VAT statement or MPIVS for you. This is sometimes just referred to as a postponed VAT statement as well.
You will be able to access your postponed import VAT statement the next calendar month after your imports arrived via the customs declaration service.
Make sure you check your postponed VAT statement against your own records to ensure it’s the right amount and you know what to expect come VAT return day. You can only access your MPIVS for six months from the date HMRC publishes it, so make sure you download and keep a copy of each postponed VAT accounting monthly statement for up to six years.
How do I complete my VAT return if I use postponed VAT accounting?
When it comes to PVA and your VAT return you need to concentrate on boxes 1,4 and 7.
Box 1 is the VAT due in the period on sales and other outputs
You’ll need to include the total amount of VAT that you have postponed, which should correlate to the numbers on your MPIVS.
Box 4 is the VAT reclaimed on purchases and other inputs
Unless your business is partially or fully VAT exempt, this will be the same number as what you put in box 1.
If you are partially or fully exempt then check with HMRC on how to go about calculating your VAT.
Box 7 is the total value of all purchases and inputs, apart from VAT
So simply input– you guessed it – the net total value of all your purchases and inputs excluding VAT.
Who can use postponed VAT accounting?
Any UK-based VAT-registered business importing goods into Great Britain (England, Scotland and Wales) from anywhere in the world can use postponed VAT accounting.
Any UK-based VAT-registered business importing goods into Northern Ireland from outside the UK and EU can use postponed VAT accounting.
You do not need prior approval to use postponed VAT accounting for import VAT.
Postponed VAT accounting and Northern Ireland
As you may have noticed Northern Ireland, Brexit and trading goods is a fast-moving political situation. So make sure you check HMRC’s web page directly for the latest guidance.
Currently Northern Ireland has unique VAT and customs arrangements for trade with EU countries. Northern Ireland-based businesses can still use postponed VAT accounting when necessary, but they’re still part of the EU’s intra-community so may not always find it necessary.
At this moment in time goods moving between Northern Ireland and Great Britain will still be treated as domestic sales and purchases, so should not incur import VAT.
Pleo can help you keep track of your VAT
Our automated invoice software keeps helps you retain all the evidence you need to pay VAT or show that you’ve accurately postponed it. You can then integrate it with a Making Tax Digital compliant software like Sage and Quickbooks.
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