Since 1 January 2021, it’s been possible for UK importers to make use of the ‘postponed VAT accounting’ scheme. This scheme allows your import business to account for VAT due on imports on your VAT return, rather than paying the cost of the VAT at the point of importation.
But why is this postponed VAT system needed? And what’s the key advantage of postponing your VAT in this way?
Why is postponed VAT needed?
The import and export rules have changed quite radically since the UK left the European Union on 1 January 2021. Prior to Brexit, VAT-registered businesses in Great Britain applied VAT through a system known as the EU reverse charge. This reverse charge simplified the taxation of intra-community transactions for both suppliers and buyers.
But since Brexit, the import VAT system has changed
How does postponed VAT help my cashflow?
Having to pay VAT at the point of importation will obviously have a significant cashflow impact for many UK businesses. The postponed VAT accounting scheme was introduced to reduce the immediate VAT hit on a company’s cashflow.
How do I account for postponed VAT?
The Government has provided guidance on how to fill out your VAT return for postponed VAT. You’ll need to obtain a C79 form and then use the information on it to complete your VAT return for the VAT period when you imported the relevant goods.
To do this, you must fill out the appropriate boxes on the form:
With this information, HMRC can review both the input and output VAT for the period in question, and then advise you of:
Talk to us about switching to postponed VAT
If you’re a UK-based import business and haven’t yet moved to the postponed VAT system, now is the time to make the switch and improve your cashflow position.
As your accountant, we can advise you on the best way to account for your import VAT and can demonstrate the cashflow benefits of moving to the postponed VAT system. VAT is a complex area and it’s always advisable to talk to a VAT tax expert when amending your VAT process.
Get in touch to discuss your import VAT.