The UK has introduced its new deferred import VAT regime, Postponed VAT Accounting (PVA) following its departure from the EU VAT regime from 1 January 2021. The relief will enable importers into the UK to avoid cash payments of import VAT, and instead declare the transactions through their next return. After Brexit UK VAT return has been updated.
Import VAT or arrivals
Prior to Brexit, goods moving into the UK from the EU, ‘arrivals’, were zero-rated for VAT when supplied on a B2B basis. This includes sales between UK and EU businesses as well as movements of own stocks. This ended with Brexit, and the UK becoming a third country, with import VAT becoming due at the customs border to clear the goods into the country. The same applies for goods moving from the UK to EU – EU import VAT is now due at the EU border.
PVA avoids import VAT cash payment
Importers with a UK VAT registration can instead choose to declare the import VAT in their next VAT return rather than making a cash payment at the border. UK or non-UK businesses may use it, and there is no need to inform HMRC that you plan to do so. This is done under the reverse charge. As a further advantage, it means there is no import delay due to paperwork formalities or payments.
The process to report the use of PVA depends on which UK customs reporting system the importer uses
- Customs Handling of Import and Export Freight (CHIEF) system: the EORI and payment method ‘G’ is indicated in box 47e must be declared in the customs declaration.
- Customs Declaration Service (CDS): the VAT registration number must be included in data element 3/40 of the declaration
Exception on consignments not exceeding £135
Under new UK ecommerce VAT rules, any consignment shipping to a consumer not exceeding £135 accrues an output, or sales VAT liability in the checkout. VAT must be charged at the point-of-sale and declared in the customs documentation.
Completing the VAT return
In the next VAT return, the VAT deferred is entered into the following boxes:
- Box 1 – VAT due on imports accounted for via PVA
- Box 2 – VAT reclaimed on imports accounted via PVA
- Box 7 – value of total imports (exc VAT)