HMRC clarifies who can reclaim import VAT
5 October 2020: The methods for deferring import VAT might result in somebody other than the owner paying the VAT. HMRC’s latest guidance reiterates that only the owner can reclaim the VAT and use postponed accounting from 1 January 2021.
In its latest Revenue & Customs Brief (15 of 2020), HMRC has reaffirmed that import VAT policy as outlined in April 2019 remains correct.
Revenue and Customs Brief 2 (2019) clarified the correct treatment for deduction of import VAT paid by taxable persons who are not the owners of the relevant goods. Following its publication, a transitional period ran until 15 July 2019 to allow businesses to put in place the correct procedures.
HMRC and HM Treasury subsequently received a number of representations from businesses and business representatives about the application of these rules in specific cases. After reviewing this feedback HMRC has confirmed that the policy outlined within Revenue and Customs Brief 2 (2019) is correct.
It is the owner, whose details (EORI) should be shown in box 8 of the import declaration, who is eligible to reclaim the import VAT, either in accordance with:
- section 24 of the Value Added Tax Act 1994 (if registered for VAT in the UK), or
- under part XXI of the VAT Regulations 1995 (SI 1995/2518).
HMRC looked at a number of specific examples raised by various businesses and representatives offering suggested solutions to the issues raised in some circumstances (further details are included in the brief). These included:
- goods temporarily imported for repair;
- goods imported for onward lease; and
- special procedures.
HMRC has reaffirmed it will only allow claims for input tax deduction made using the correct procedures. A claim under Part XXI of the VAT Regulations 1995 (SI 1995/2518) can be made provided there is no other VAT relief available at import.
Postponed VAT accounting
As advised previously, from 1 January 2021, UK VAT-registered businesses will be able to use postponed VAT accounting to account for import VAT on their VAT Return for goods imported for use in their business from anywhere in the world.
This latest brief from HMRC contains a reminder that ordinarily, postponed VAT accounting is not mandatory and businesses can start to use it at any time after 1 January 2021. However, businesses must use postponed VAT accounting if they import non-controlled goods from the EU to Great Britain from 1 January 2021 to 30 June 2021. They can either defer their supplementary customs declaration or use simplified customs declaration process where authorised and make an entry in declarants records.
As with existing processes, it is the owner of the goods, the person who is using the goods in the course of their business, who can use postponed VAT accounting. It means they can declare and recover import VAT on the same VAT Return, subject to the normal rules on input tax deduction. Non-owners cannot use postponed VAT accounting.