Postponed accounting for Great Britain businesses

On 1 January 2021, the government introduced postponed accounting for import VAT on goods brought into the UK. This will improve your business cash flow and means you can declare and recover import VAT in the same VAT return, rather than paying import VAT on or soon after the goods arrive at the UK border.

Great Britain - England, Scotland and Wales

Businesses in Great Britain will treat EU purchases in the same way as rest of the world imports. Postponed accounting can be used for both.

Northern Ireland

Businesses in Northern Ireland will continue to trade goods with the EU as they did before Brexit. Postponed accounting can be used for their rest of the world imports.

Make sure you have an EORI number

To import goods, you'll need an Economic Operators Registration and Identification number (EORI).

HMRC guidance - Get an EORI number

Import VAT and duty

If you import goods, you'll most likely pay import VAT and duty. This applies if the goods you buy are subject to VAT in the UK. For most imported goods the standard 20% VAT rate is applied.

If you use an import agent, VAT and duty owed to HMRC is usually included on the invoice supplied by the import agent.

From 1 January 2021, UK VAT registered businesses can use postponed accounting to account for VAT on imported goods on their VAT returns.

This means UK VAT registered businesses importing goods to the UK will be able to pay and reclaim VAT in one go, rather than paying import VAT on or soon after the goods arrive at the UK border.

This can be done on a transaction by transaction basis and means businesses don't have to pay import VAT for goods at the UK border or reclaim the VAT from HMRC.

Is this right for your business?

If you regularly buy from outside the UK it can significantly improve your cashflow, as you don’t pay VAT on things you haven’t received yet.

If you want to use postponed accounting we'll automatically work out the VAT postings for you.

If the scheme is withdrawn, the government has promised to give at least 12 months’ notice.

How it works

To understand the impact postponed accounting could have on your business, compare the same transaction posted with, and without postponed accounting.

On 1 January your business buys goods from the EU (outside the EU in Northern Ireland) for purely business use. It costs £20,000.

Without postponed accounting

Date

 

Invoice amount

Amount paid

1 January

You receive an invoice from your supplier for the cost of the goods. The VAT is zero rated, so the invoice is just for the net value.

£20,000

£20,000

3 January

Your goods arrive in Ireland. You have to pay the duty and import VAT before your goods are released from the warehouse.

If you use an import agent, they will pay the duty and import VAT for you and then charge you and add their fees

You receive and pay the invoice from your import agent for £2,000 duty and £400 VAT and the £4,000 Import VAT due on the purchase.

£6,420

£6,420

9 April

You submit your VAT Return. The VAT on this transaction is recorded in box 4 of your VAT Return. so you can now reclaim the total VAT paid.

 

-£4,400

Using postponed accounting

Date

 

Invoice amount

Amount paid

1 January

You receive an invoice from your supplier for the cost of the goods. The VAT is zero rated, so the invoice is just for the net value.

As you're using postponed accounting, you estimate the VAT at 20%.

The estimated VAT of £4,000 is recorded boxes 1 and 4 on your next VAT return and the net value impacts box 7.

£20,000

£20,000

3 January

Your goods arrive in the UK. As you have postponed the VAT, the import VAT is not paid.

If you use an import agent, they will pay the duty and then charge you and add their fees.

You receive and pay the invoice from your import agent for £2,000 duty and £400 VAT.

£2,400

£2,400

9 April

 

   

9 April

Submit your VAT Return. The estimated VAT is recorded in boxes 1 and 4 of your VAT Return. As these entries cancel each other off, no VAT is due. The purchase is recorded in box 7.

   

Record transactions using postponed accounting

The way you record your Import VAT will usually depend on when you receive your documents.

  • Estimate the VAT when you receive your supplier's invoice.

    This is likely to be the most common scenario. Consider this method when there is likely to a be a long gap between receiving the invoice for the goods and receiving the monthly statement from HMRC.

  • Don't estimate the VAT on your supplier invoice and record the import VAT when you get your monthly statement from HMRC (C79 certificate).

    Consider this method if you receive your monthly statement and supplier invoice in the same period.

  • Declare the postponed VAT when you receive the invoice from your Import agent.

    Consider this method when your import agent provides an accurate postponed VAT value for you.

Estimate the VAT on your supplier’s invoice and correct it when you get your statement

This is where you estimate the amount of Import VAT and declare it when you record the invoice from your supplier. In most cases the import VAT is charged at the same rate as a domestic purchase.

When you receive your monthly statement from HMRC (C79 certificate), check the VAT on the statement matches the VAT declared on the invoice. Record any differences as a journal to adjust the VAT return.

For example, you buy goods worth £20,000 from a supplier in Germany. The import VAT due will be around £4,000 so you include this on your supplier invoice. When you get your monthly statement from HMRC the actual import VAT is £3998, so you need to make an adjustment to add to your next VAT return.

Enter the supplier invoice

  1. Select your supplier.
  2. Enter the details of the goods purchased as normal.

  3. The VAT rate will automatically be set to Zero Rated. Change the VAT Rate to Standard or Lower Rate as required.

    This automatically applies postponed VAT on your invoice. Although VAT is not shown on the invoice, we estimate the VAT for you and record it as a VAT on a sale (Box 1) and VAT on a purchase (Box 4) on the VAT return.

    Image how to select the VAT rate in an invoice

     

Adjust the VAT when you receive your monthly statement (C79 certificate)

Once you receive your monthly statement from HMRC, check that the VAT estimated on the invoice matches the import VAT due on the statement.

Use the Overseas Purchase of Goods report to help you reconcile your VAT return, and make VAT adjustments where required. This now includes both EU and ROW sales and shows which invoices have estimated VAT.

If there is a difference between the estimated VAT and the VAT on you monthly statement, record an adjustment using a journal.

In our example, we estimated the VAT at £4000 but the monthly statement is showing £3998 so we need to enter a VAT adjustment journal for the £2.

  1. From Journals, select New Journal.
  2. Enter the details.
  3. Add amount of the adjustment on two lines, one VAT on sales and one for VAT on purchases.

    To reduce the VAT, record VAT on sales as a Debit and VAT on purchases as a Credit.

    To increase VAT, record VAT on sales as a Credit and VAT on purchases as a Debit.

    Make sure you select the Include On VAT Return check box.

Record the import VAT when you get your monthly statement (C79 certificate)

This is where you don't estimate the Import VAT and wait to record the import VAT until you get your monthly statement.

Use the Overseas Purchase of Goods report to help you reconcile your monthly statement, and make VAT adjustments where required. This now includes both EU and ROW transactions.

For example, you buy goods worth £20,000 from a supplier in Germany. When you get your monthly statement from HMRC the actual import VAT is £3998, so you record this as a VAT journal and update your VAT return.

Enter the supplier invoice

  1. Select your supplier.
  2. Enter the details of the goods purchased as normal.

  3. The VAT rate will automatically be set to Zero Rated and VAT is not included on your VAT return.

    Image how to select the VAT rate in an invoice

     

Record the VAT when you receive your monthly statement

Once you receive your monthly statement from HMRC, record the import VAT using the value from your statement. In our example, the VAT on the statement is £2 less than the amount we estimated.

  1. From Journals, select New Journal.
  2. Enter the details.
  3. Add amount of the import VAT on two lines, one for VAT on Sales as Credit and one for VAT on purchases as a Debit.

    Make sure you select the Include On VAT Return check box.

    Ledger Account Incl in VAT Return Debit Credit
    2200 VAT on Sales Yes   3998
    2201 VAT on Purchases Yes 3998  

Declare the VAT when you receive the invoice from your import agent

This is when you declare the VAT when you receive the invoice from your import agent, when your import agent provides an accurate postponed VAT value for you.

Record invoice from your import agent

Make sure you have set up a supplier record for your import agent and selected the Is Import agent check box. These could be an import agent, freight forwarder or Customs and Excise.

Image to show setting up contact as an import agent

  1. Select your import agent.
  2. Select Use postponed accounting to deal with import VAT.
  3. Record the details from the importer invoice.
  4. On a separate line, enter a VAT only line for the import VAT, using the relevant VAT rate.

The VAT is recorded and then automatically deducted from the same invoice.

Image of the postponed accounting checkbox and VAT treatment in an EU purhase invoice