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Paying VAT on Imports

When you import goods into the UK, you'll need to pay VAT and any customs duty that applies. However, if you're VAT-registered, you can use postponed VAT accounting to declare and recover import VAT on the same VAT Return, rather than paying it upfront. This guide explains your payment options,...

When you import goods into the UK, you'll need to pay VAT and any customs duty that applies. However, if you're VAT-registered, you can use postponed VAT accounting to declare and recover import VAT on the same VAT Return, rather than paying it upfront. This guide explains your payment options, including postponed VAT accounting, duty deferment accounts, and immediate payment methods.

What is postponed VAT accounting?

Postponed VAT accounting means you declare and recover import VAT on the same VAT Return, rather than paying it upfront when the goods arrive and recovering it later. This is the default method for UK VAT-registered businesses importing goods.

You don't need any approval to use postponed VAT accounting. Your business simply needs to be registered for VAT in the UK.

You can use postponed VAT accounting for goods you import into:

  • Great Britain (England, Scotland and Wales) from anywhere outside the UK
  • Northern Ireland from outside the UK and EU

When you declare and recover the VAT on the same return, the amounts typically cancel each other out, improving your cash flow. The normal rules about what VAT you can reclaim as input tax still apply.

Who can use postponed VAT accounting

To use postponed VAT accounting, both of the following must apply:

  • The goods you import are for use in your business and you have the right to dispose of them (usually as the owner)
  • You include your VAT registration number on your import declaration

When someone imports goods on your behalf

If you use a freight forwarder, customs agent, broker, or express operator to import goods, you must tell them in writing that you want to use postponed VAT accounting. They must have this written confirmation before they can proceed with the import declaration. Keep a written record of your instructions.

If your supplier arranges for someone to import and deliver goods for you, you must agree with the supplier how you want to account for import VAT. You'll also need to give the supplier your EORI number (your customs identification number).

Special situations

You can use postponed VAT accounting even if you import goods that will be used for both business and non-business purposes, or if you don't know at the time of import whether they'll be used for business purposes.

If you release excise goods for use in the UK (also known as goods 'released for home consumption'), you can account for import VAT on your VAT Return. This includes when goods are released from an excise warehouse after being in duty suspension since they were imported.

When you cannot use postponed VAT accounting

You cannot use postponed VAT accounting if your business receives goods through the post in consignments of more than £135 using Royal Mail Group (including Parcelforce, where they're not acting as an express operator). However, Royal Mail Group does offer postponed VAT accounting for commercial (non-postal) services if requested by the importer.

Different rules apply for goods in consignments valued at £135 or less. If you're eligible to make a simple online declaration for commercial goods (merchandise in baggage) and choose to do so, you cannot account for import VAT on your VAT Return.

How to use postponed VAT accounting on your import declaration

When completing your import declaration, select that you'll be accounting for import VAT on your VAT Return. You need to enter your VAT registration number at header level in Data Element 3/40 (you should not use method of payment G in Data Element 4/8).

You cannot change how you want to account for import VAT once you've submitted your import declaration.

VAT will be recorded against your EORI number at declaration level only.

Completing your VAT Return with postponed import VAT

You must account for postponed import VAT on your VAT Return for the accounting period which covers the date you imported the goods.

You'll receive a monthly postponed import VAT statement showing the total import VAT postponed for the previous month. Use this statement to complete your VAT Return as follows:

Box 1: Include the VAT due in this period on imports accounted for through postponed VAT accounting

Box 4: Include the VAT reclaimed in this period on imports accounted for through postponed VAT accounting (if you're entitled to reclaim it)

Box 7: Include the total value of all imports of goods in this period, not including any VAT

If you use the Flat Rate Scheme for small businesses, you should not include import VAT accounted for using postponed VAT accounting in your flat rate turnover. The VAT due on any imports should be added to box 1 after you have completed your Flat Rate Scheme calculation.

You cannot use the VAT Cash Accounting Scheme for goods you import or remove from a customs warehouse.

Correcting errors

If you later find out the import VAT amount has changed or is incorrect, you must either:

  • Amend any nil net tax errors on your next VAT Return (where the import VAT adjustment in box 1 equals the input tax claim in box 4)
  • Follow the standard error correction procedures

Other ways to pay import VAT and customs duty

If you choose not to use postponed VAT accounting, or if you're not eligible, you have several other payment options:

Duty deferment account

A duty deferment account lets you make one payment a month by Direct Debit rather than paying for individual consignments. This means you delay paying the charges for an average of 30 days, and HMRC can normally clear your goods more quickly because they don't have to handle payments for each transaction.

You can apply for a duty deferment account if you don't have one already. You can also make top-up payments to your account.

If you hire someone to deal with customs for you, you can give them authority to use your deferment account.

Cash accounting

If you have access to the Customs Declaration Service, you can use cash accounting to pay for customs duty and import VAT when you make a declaration.

General guarantee account

You can use a general guarantee account to cover amounts due on goods you import. Guarantees may be needed if you declare goods for Temporary Admission or the value of duty is disputed or unknown.

Immediate payments

You can use immediate payment methods to pay what you owe at the time of import.

If you're not VAT-registered

If you're a UK trader and not registered for UK VAT, you still have to pay import VAT but you cannot reclaim it.

If you're a non-UK trader and not registered for UK VAT, you can arrange for an agent in the UK to import and supply goods on your behalf. The agent may be able to recover the import VAT as input tax if they're acting as principal under Section 47 of the VAT Act.

Getting your import VAT certificate

If you're registered for UK VAT and you've not used postponed VAT accounting, you'll need an import VAT certificate (C79) to claim import VAT as input tax on your VAT Return. If you've used postponed VAT accounting, your monthly postponed import VAT statement provides the evidence you need.

Check your import VAT certificate (C79) and postponed VAT account statements using the Customs Declaration Service to make sure all your imports are covered.

Sources

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.

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