Changes to import VAT from 2021

As of 1 January 2021 the VAT treatment of imported goods is changing. Until then the current rules apply and change depending on if the goods are imported from EU or non-EU countries.

Postponed accounting

UK VAT registered business will be able to account for import VAT on VAT returns for goods from all around the world. Instead of paying upfront for the import VAT and recovering it later, UK VAT registered businesses will be able to declare and recover the import VAT on the same VAT return.  This known as ‘postponed accounting’ and should offer cashflow advantages in comparison to the current rules for imports outside of the EU.

Normal rules about what VAT can be reclaimed as input tax will still apply.

Postponed accounting can be used to account for import VAT where:

• Goods are imported for use in a business
• The business’s EORI number, which starts GB, is included on the customs declaration
• The business’s VAT registration number is shown on the customs declaration, where needed

Where postponed accounting will not apply

Businesses will not be able to use postponed accounting for imports made under the authorisation to use simplified declarations for imports, where simplified frontier declarations are made before 1 January 2021. This will be the case even if the supplementary declaration is made after this date.

Different rules apply to goods in consignments not exceeding £135.

Special procedures

For goods that are put into a customs special procedure, import VAT will need to be accounted for on the VAT return covering the date when the declaration is made to release the goods into free circulation.

This applies to:

• Customs warehousing
• Inward processing
• Temporary admission
• End use
• Outward processing
• Duty suspension

VAT return completion

When goods are imported, it will be necessary to account for import VAT on the next VAT return. There will be an online monthly statement available to download and keep, showing the total import VAT postponed for the previous month that will need to be included on the VAT return.

The changes to how the VAT return should be completed are as follows:

• Box 1 must include the VAT due in the period on imports accounted for through postponed VAT accounting.
• Box 4 must include the VAT reclaimed in the period on imports accounted for through postponed VAT accounting.
• Box 7 must include the total value of all imports of goods included on the online monthly statement, excluding any VAT.

Businesses who are eligible to defer their customs declarations must declare import VAT on the VAT return that covers the date the goods were imported. This means it may be necessary to estimate the import VAT due from the records of imported goods in order to complete the VAT return.

After submitting a deferred declaration, the following monthly statement will show the amount of import VAT due on that declaration. It will then be possible to adjust any previous estimate and account for any difference on the next VAT return.