Accounting for VAT on Imports from 1st January 2021

What has changed?

From 1^st January 2021 companies can opt to use postponed accounting for VAT when dealing with goods imported from anywhere in the world including the EU. Exemptions apply but postponed accounting for VAT eases the burden of paying VAT as goods arrive in the UK and then having to recoup it via your VAT return.

During VAT return period all invoices that relate to the cost of importing goods, e.g. goods, freight, customs clearance, delivery etc. are to be shown as both an input and an output in the tax return. This method is very similar to the reverse charge process currently in place for importation of goods from the EU. The difference between the two is that this now applies to ALL imports from anywhere in the world including EU countries and the boxes on the VAT form that need to be completed.

The organisation’s EORI number beginning with GB and the VAT registration number (if applicable) must be on the customs declaration.

The VAT return

Currently, under the reverse charge function, the input tax is shown in box 2 of the return and the offset is in box 4. The good’s cost is posted to boxes 7 and 9.

Tax on any goods imported from 1st January 2021 will need to be accounted for on the next VAT return. An online monthly statement will be available to download and keep, which will show the total import VAT postponed for the previous month that should be included on the VAT return.

Due to postponed accounting, there will be changes to how the VAT return should be completed.

Completing your VAT return

Box 1 must include the VAT due in the period on imports accounted for through postponed VAT accounting. As well as the usual domestic purchases.

Box 4 must include the VAT reclaimed in the period on imports accounted for through postponed VAT accounting. As well as the usual domestic sales.

Box 7 must include the total value of all imports of goods included on the online monthly statement, excluding any VAT and the usual domestic purchases.

Useful links

HMRC Postponed Accounting

Disclaimer: This information is accurate at point of publication and is taken from the publically available HMRC website. CPiO assumes no responsibility for the validity of this information and encourages all customers to seek specific professional advice over VAT.