After Brexit, companies that imported products into the UK from anywhere in the globe were compelled to pay tax at the point of entry. For firms, this has produced a number of difficulties that have made cash flow more difficult. The UK government introduced a new delayed VAT accounting system to prevent this problem. What is postponed VAT accounting, and how can you get a statement for your company? Let's discuss.
What is VAT accounting with a postponement?
A way for firms to account for import VAT is through postponed VAT accounting. As well as being called "postponed accounting," this also goes by the name "postponed import VAT accounting."
Since Brexit, imports from the EU are also subject to this requirement, and any imports from non-EU nations that exceed £135 must be subject to VAT. The money is made in advance and will be subsequently returned.
Because they must pay the import VAT to prevent having their products held at customs, which has a negative cash flow, UK firms or companies registered for VAT are heavily impacted.
Businesses who choose for delayed VAT can disclose and record import VAT instead of making a prompt tax payment. Keep in mind that deployment of an import declaration differs from postponing the import VAT. When we say there is an import declaration delay, we mean that it can take up to 175 days to give HMRC all of the relevant information regarding your items.
Why a delayed VAT account is advantageous to your business
Postponing VAT accounting only improves cash flow in the short run; there are no long-term advantages.
Suppose a company imports products on January 9th and has a VAT quarter that ends on March 31, 2022. The previous regulations required that import VAT be paid in advance, let's suppose it was £20,000.
The result is that the company's cash flow will be £20,000 negative. On its subsequent VAT return, which is due on the 7th of May and covers the period ending March 31, 2023, the company may claim this.
This means that the deficit will persist for a while. In contrast, no upfront payment is necessary when using the postponed VAT accounting method, hence there is no cash flow shortfall for this VAT.
What types of imports are covered by the delayed import VAT accounting?
Every firm that is VAT-registered in the UK that imports products for commercial purposes is subject to the postponed VAT accounting. Anyone can use the program at any time and right away; there is no need to apply or get permission.
In this scenario, Northern Ireland is subject to distinct regulations because it is still a member of the EU VAT region. This is one of the things you need to keep in mind.
Also keep in mind that in order to avoid paying import VAT, firms who are below the VAT threshold but have not yet registered for VAT must do so.
The requirement for delayed VAT accounting
It is not required to use postponed VAT accounting.
If the business employed the initial six-month customer deferment term following the conclusion of the Brexit transition period, it would be the sole instance in which postponed import VAT accounting would be necessary.
Alternatively, if the firm so chooses, they can pay the VAT up front at the port of entry when the products enter the UK and afterwards claim it.
Businesses must get monthly C79 (import VAT certificates) reports from HMRC if they choose not to use the postponed VAT accounting method to increase their cash flow.
How to complete a delayed VAT import statement
In advance of saying this
Make sure that your company obtains an EORI number prior to submitting the VAT import statement. UK customs authorities make use of the EORI system of individual identifying numbers. It is necessary for both exporting commodities out of the region to other parts of the world and importing commercial items into the UK.
Vat on VAT Return postpone
If you postponed paying the import VAT, you must still disclose it on your VAT return. To continue the procedure of delaying the payment of VAT on the VAT return, sign in to the government portal.
You may get your VAT statement, which includes any postponed VAT payments for a certain time period, through the Customs Declaration Service (CDS) portal. In the following boxes of your VAT Return, you can enter the figures after you have your statement on hand:
Box 1
Add the postponed VAT accounting's owed VAT to the amount owed during this time. The aforementioned monthly statement contains this data, which is retrievable.
You must make an educated guess at the amount if you delayed your declaration and do not have the statement.
Add the VAT that was reimbursed for imports under the postponed VAT plan at this time to Box 4. If you have delayed your import declaration and do not have a statement, this amount must also be calculated, just like in Box 1.
Box 7 should contain the entire dollar amount, excluding VAT, of all merchandise imported during this time.
The values must be entered solely in boxes 4 and 7 if you decide not to employ the postponed VAT system for some imports.
The UK government website also provides further details on how to complete and submit your VAT Return.
Delay VAT on Custom Declaration
Typically, you must submit your EORI Number, which begins with GB for Great Britain and XI for Northern Ireland, on your customs statement.
Additionally, you need to include your UK VAT number (VRN). You must fill out Box 47e with your payment method. It is necessary to enter a "G" in this field if you want to delay VAT accounting. In doing so, customs will not detain your products but will make a notation that import VAT will be accounted for later.
Directly through the UK government website, you may register for the Customs Declaration Service.
Due of the intricacy of customs declarations, many companies opt to have transporters or customs agents handle this task on their behalf. In order to delay paying the VAT, you will next need to make sure the agent is aware of your request.
Northern Ireland has postponed its VAT accounting.
The situation with Northern Ireland is evolving somewhat in terms of postponed VAT accounting. Northern Ireland has a special VAT and customs system since the country continues to be a part of both the UK and the European VAT area:
Northern Ireland receives imports from the EU
These are considered purchases and supplies made within the community. The Reverse Charge procedure will be used in its place since postponed VAT accounting is neither appropriate or essential.
between Northern Ireland and the rest of the UK for the movement of goods
Sales and acquisitions of the products are regarded as domestic. However, there is no requirement for delayed VAT accounting. The regular UK VAT procedure will apply in this case.
For imports from any non-EU nation, however, Northern Ireland-based companies must continue use the postponed VAT accounting system.
Conclusion
To ease businesses' concerns about importing products and the effects on their cash flow caused by Brexit, postponed VAT accounting was introduced. To ensure the success of your business and prevent any bad effects, you should comprehend the plan and how to obtain your VAT postponed appropriately.
Contact BBCIncorp so we can support you along the way if you have any questions. Send us an email at service@bbcincorp.com or leave a note, and we'll get back to you right away.
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