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HMRC guidance on changes to import VAT from 2021

11 August: The VAT treatment of imported goods is changing from 1 January 2021 following the end of the transition period. HMRC has started to issue guidance on the changes.

HMRC has issued guidance on accounting for import VAT on VAT returns from 1 January 2021. Until 1 January 2021, the current rules apply and differ depending on whether goods are imported from EU or non-EU countries.

Postponed accounting

For businesses registered for VAT in the UK, it will be possible to account for import VAT on VAT returns for goods imported from anywhere in the world. This will be done by declaring and recovering import VAT on the same VAT return, rather than having to pay it upfront and recover it later. This is commonly referred to as “postponed accounting” and offers a simplification and cash flow advantages compared to the current rules for imports from outside of the EU.

The normal rules about what VAT can be reclaimed as input tax will apply.

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

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

Special procedures

Import VAT on goods put into a customs special procedure should be accounted for on the VAT return covering the date when the declaration that releases those goods into free circulation is made.

This applies to the following special procedures:

  • customs warehousing,
  • inward processing,
  • temporary admission,
  • end use,
  • outward processing, and
  • duty suspension.

A similar principle applies to the release of excise goods from an excise warehouse for use in the UK, which is also known as “released for home consumption”.

Situations where postponed accounting will not apply

It will not be possible to use postponed accounting for imports made under 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.

VAT return completion

After the goods have been imported, it will be necessary to account for import VAT 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:

  • 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.

For businesses that are eligible to defer their customs declarations (for example, where the business makes supplementary declarations), import VAT must be declared on the VAT return which includes the date that the goods were imported. To complete the boxes on the VAT return, it may be necessary to estimate the import VAT due from the records of imported goods.

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