What is postponed VAT accounting?
Businesses registered for VAT in the UK are able to account for import VAT on their VAT return, often referred to as postponed VAT accounting. For most businesses, this means that they can declare and recover import VAT on the same VAT return. The normal VAT recovery rules, regarding VAT that can be reclaimed as input tax, apply.
This applies to all customs declarations that require businesses to account for import VAT, including supplementary declarations, except when HMRC have notified a business otherwise.
These rules save businesses from having to pay import VAT (at the port of entry) and then having to recover it. This offers significant cashflow benefits for businesses compared to paying import VAT upfront and then having to wait for recovery.
If a person or business imports goods on your behalf postponed VAT accounting can still be used. You need to give them clear written instructions before they can proceed with the import declaration.
Goods can also be acquired from a supplier who arranges for a person or business to import and deliver the goods for you. Again, clear written instructions are necessary and you will need to give the supplier your EORI (Economic Operators Registration and Identification) number.
Businesses are able to account for import VAT on imports into Great Britain (England, Scotland and Wales) from anywhere outside the UK. Businesses in Northern Ireland can use the postponed VAT accounting for goods imported from outside the UK and EU.
VAT registered businesses do not need any specific approval from HMRC in order to account for import VAT on their VAT return.
How Moore South can help
Postponed VAT accounting can offer significant cash flow advantages, but it is important that import VAT is reported correctly and consistently on VAT returns. Errors in reporting can lead to mismatches with HMRC data and unnecessary queries.
Moore South advises businesses on VAT compliance, helping ensure postponed VAT accounting is applied correctly, aiding cash flow.
Contact Moore South to discuss whether postponed VAT accounting is right for your business.