Postponed VAT Accounting | Its Benefits & Meaning 2024

The postponed VAT accounting system helps individuals and businesses manage cash flow more effectively by avoiding the immediate financial burden of paying import VAT. This system also prevents goods from being held in customs until the VAT is paid. Simply put, postponed VAT accounting is a way for businesses to delay paying VAT on goods and products they import.

Instead of paying the VAT right when the goods arrive, businesses can include it in their regular VAT return. This means that they handle the VAT payment later, which helps them manage their cash flow better. Furthermore, it functions much like the reverse charge system used for EU trade before Brexit.

Who is Eligible to Use the Postponed VAT Accounting Scheme?

Any VAT-registered businesses in the UK can use postponed VAT accounting (PVA). There’s no need to apply or seek approval; you can start using it immediately. You should be importing goods for business purposes.

Moreover, businesses in Northern Ireland remain within the EU VAT area and are exempt from paying import VAT on goods coming from the EU. The reverse charge mechanism still applies. However, businesses in Northern Ireland can use postponed VAT accounting for goods imported from outside the EU.

In addition, participation in the postponed VAT accounting scheme is optional. If you prefer, you can pay VAT upfront when the goods enter the UK, such as at the port of entry or after release from a customs warehouse. However, if you delay submitting custom declarations, such as during the first six months after the transition period, you must use postponed VAT accounting.

Do You Know? VAT Number Check | VIES VAT Checker

How Does Postponed VAT Accounting Work?

To use postponed VAT accounting, your business must be registered with the Custom Declaration Service. If you are planning to use postponed VAT accounting for import goods, the customs declaration form must include the following:

Your Economic Operators Registration and Identifier (EORI) number.
UK VAT registration number (VRN).
A ‘G’ in box 47e indicates the method of payment for import VAT.

If you use postponed VAT accounting, you will receive an online schedule of imports to download monthly, instead of a C79 document. Furthermore, the postponed VAT accounting report is essential for your VAT records.

How do I Fill out the VAT Return if I use Postponed VAT Accounting?

If you have used postponed VAT accounting for your imports, you must report this VAT on your VAT Return for the period during which the goods were imported. To complete your VAT Return, you must download your monthly postponed import VAT statement (MPIVS) from HMRC. These statements are usually accessible by the 6th working day of each month.

Each statement reflects the total import VAT deferred from the previous month. Download and keep copies of these statements, and cross-check them with your records. You must fill out these three boxes on your VAT return:

Box 1

Enter the VAT due for this period on imports using the postponed VAT accounting. You can find this information on your monthly statement.

Box 4

Enter the VAT reclaimed for imports using postponed VAT accounting in this period.

Box 7

Enter the total value of all goods imported for this period, excluding VAT.

Do You Know? VAT Threshold Ireland & Registration for VAT in Ireland

Final Verdict

In conclusion, postponed VAT accounting is a valuable tool for businesses involved in importing goods. By deferring import VAT payments and handling them through the VAT return, businesses can significantly improve cash flow and simplify the VAT reporting process.