Following the UK’s exit from the EU at the end of 2020, a new system was recently introduced to allow businesses who import goods into the UK to deal with the payment of import VAT in a different way.
The newly introduced Postponed VAT Accounting (PVA) system, which came into effect on 1 January 2021, gives businesses who import goods the opportunity to account for import VAT on their VAT return, as an alternative to paying import VAT upon entry of the goods into the UK and later reclaiming the value a month or two down the line on their next VAT returns.
Who’s entitled to use PVA?
All VAT registered businesses who import goods into the UK for business purposes can choose to use the new PVA system.
Does it matter which countries my business imports from?
One of the biggest misconceptions surrounding PVA is that the new system is solely related to Brexit and therefore it only applies to imports from EU member states.
This is incorrect – as a British business, if you import from anywhere outside of the UK (such as India or China), you can choose to adopt this approach and use PVA, regardless of where your business imports from. If your business is based in Northern Ireland, you can use PVA on goods imported from outside the UK and EU.
My business fits the criteria, should we switch to PVA?
If your business fits the above criteria, it may be worth considering a move to PVA. To help you understand whether this would work for you, we have outlined a few pros and cons below:
– PVA can provide a boost to cash flow – by using PVA, you never have to pay upfront to recover the cost later (as a result, a cash flow boost is received which could be significant dependant on the volume of imports)
– PVA avoids the need to pay your freight forwarder an admin charge for paying the import VAT on your behalf and subsequently recharging this to you
– If you operate a deferment account, using PVA can save significant costs in relation to charges associated with bank guarantees, as there is no longer a need to push the import VAT through it
– For any businesses who believed they had to operate a deferment account, using PVA would allow you to consider closing this down and save the hassle of running it
– PVA is optional, so if you would prefer to use PVA on some imports but not on others, this is allowed (however, it’s worth noting that this could cause confusion when completing VAT returns, so we’d recommend you choose one approach)
– If you use a number of freight forwarders / customs agents to bring your goods into the UK, you will need to notify each of them that you wish to use PVA as they will need to show this on your customs declaration. This may be a challenge – although the bigger logistics firms are now familiar with the new system, many businesses are still seeing smaller firms struggle to understand what needs to be done
– Customs duty cannot be accounted for using PVA, so you may still want to operate a deferment account depending on the amounts involved
Admin regarding import VAT – has anything changed?
Businesses should keep in mind:
– When import VAT is paid upfront, a C79 form will be issued by HMRC to use as evidence for the recovery of the VAT – this process hasn’t changed
– When PVA is used, businesses will instead have to download a Monthly Postponed Import VAT statement (MPIVS) from their HMRC gateway account
– Businesses should be aware of changes to the boxes to be used when completing VAT returns and any software code changes that need to be made
Get in touch
If you have any questions regarding the use of Postponed VAT Accounting or would like advice tailored to your specific situation, please get in touch with us at firstname.lastname@example.org and we’ll direct you to the best person.