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Spring Budget 2020: Postponed accounting for import VAT to apply from 1 January 2021

From 1 January 2021, the government has confirmed that postponed accounting for VAT will apply to all imports of goods, including goods imported from the European Union (EU).

Last updated: 11 March 2020

Postponed accounting means that the importer does not pay import VAT when the goods arrive at the UK port or airport: it is deferred. The importer instead posts the VAT to Box 2 of their relevant VAT return. Assuming they can claim input tax in full on the goods (i.e. there is no private, exempt or non-business use), the same amount is claimed as input tax in Box 4 on the same return, subject to obtaining an electronic certificate of VAT paid from HRMC.

All goods bought from the EU are currently imported VAT-free, with only non-EU goods being subject to import VAT, duties and Customs clearance procedures. Import VAT is payable on entry but importers have to wait up to three months to claim input tax on their VAT returns.  

When the UK leaves the EU VAT regime, import VAT will apply to all goods brought into the UK, and for many businesses this would have meant significant cash flow problems - the postponed accounting system should address this. 

Businesses used to bringing in goods only from the EU need to prepare for the regime outside the Single Market and the Customs Union that will apply after 31 December 2020. From 1 January 2021, the UK government is planning to introduce full import and export controls on most goods coming into and leaving the UK for the EU.  

Details of the arrangements for trade between Northern Ireland and Ireland contained in the Protocol in the Withdrawal Agreement are yet to be determined.

Read more on the Budget here.

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Linda Skilbeck

+44 (0)20 8037 3114
skilbeckl@buzzacott.co.uk
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Last updated: 11 March 2020

Postponed accounting means that the importer does not pay import VAT when the goods arrive at the UK port or airport: it is deferred. The importer instead posts the VAT to Box 2 of their relevant VAT return. Assuming they can claim input tax in full on the goods (i.e. there is no private, exempt or non-business use), the same amount is claimed as input tax in Box 4 on the same return, subject to obtaining an electronic certificate of VAT paid from HRMC.

All goods bought from the EU are currently imported VAT-free, with only non-EU goods being subject to import VAT, duties and Customs clearance procedures. Import VAT is payable on entry but importers have to wait up to three months to claim input tax on their VAT returns.  

When the UK leaves the EU VAT regime, import VAT will apply to all goods brought into the UK, and for many businesses this would have meant significant cash flow problems - the postponed accounting system should address this. 

Businesses used to bringing in goods only from the EU need to prepare for the regime outside the Single Market and the Customs Union that will apply after 31 December 2020. From 1 January 2021, the UK government is planning to introduce full import and export controls on most goods coming into and leaving the UK for the EU.  

Details of the arrangements for trade between Northern Ireland and Ireland contained in the Protocol in the Withdrawal Agreement are yet to be determined.

Read more on the Budget here.

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