Businesses importing goods need to pay Import VAT before the goods are allowed into the country.
However, from 1 January 2021, Businesses buying goods from outside the UK may need to account for VAT using a new Postponed VAT Accounting system or a Reverse Charge (if the consignment is valued at £135 or less).
The method of accounting for VAT will be very similar to the procedure currently in place for purchases from the EU.
Businesses which complete their Import Declarations correctly will have access to a Monthly Online Statement, which will determine how much VAT needs to be accounted for.
When using postponed VAT accounting, import VAT due on goods arriving in the UK or Ireland can be accounted for on a VAT Return, rather than having to pay the VAT as soon as the goods arrive at the border.
Postponed accounting has been introduced to mitigate the cashflow impact on businesses, who previously did not have to factor in paying Import VAT when buying goods from the EU. However, postponed accounting can be used for imports from both EU and non-EU countries and, in the UK, it is optional at an import declaration level.
Postponed accounting will affect how EU and non-EU imports and exports are recorded within your accounting software and so you must be prepared. To help our Business Innovation team have put together some guidance below:
In mid-December, Sage will be releasing a new update for Sage 50cloud Accounts v27. This update has five new tax codes that will be created the first time you open your company after the update. The new tax codes will help you process EU and non-EU imports and exports.
As default, the new tax codes will be in the range T15 to T19, however, they may differ depending on the tax codes already in use.
To check the tax codes in your Sage50 software
Click Settings > Configuration > Tax Codes
|Box affected on the VAT return|
|T15||Purchase of services from ROW – Reverse charge||6 and 7||1 and 4|
|T16||Purchase of services from ROW – No VAT||7||N/A|
|T17||Import of goods – Under import reverse charge threshold||7||1 and 4|
|T18||Import of goods – Postponed VAT||7||1 and 4|
|T19||Import of goods – VAT not postponed||7||4|
Please note that if you import purchase invoices or credits via CSV or Excel files, or via third party software using Sage Data Objects (SDO), there are further postings you must make when using postponed accounting. Please contact us if you need further guidance.
Xero will be releasing a Postponed VAT Accounting update in advance of the submission of your first VAT return in 2021. The update will be automatically available at no additional cost for Xero customers who use Making Tax Digital (MTD).
A new ‘PVA option’ button will need to be selected when creating a VAT return in Xero. You simply then add the amount from your Monthly Postponed Import VAT Statement (MPIVS). Your VAT return will then be populated by Xero automatically.
There will be new VAT codes within QuickBooks Online from 1 January 2021 and these can be found in the VAT rate settings in QBO.
- PVA Import VAT 20%
- PVA Import VAT 0%
Go to Taxes > Edit Settings > Edit VAT rates. On the smaller gear icon select Show Inactive. The toggle can be used to switch the VAT rates on.
Please note that these new VAT codes will only appear if the transaction is dated on or after 1 January 2021. If the VAT codes are selected in your QuickBooks Online data, you will see them post to the following boxes on your VAT return:
Box 1 – Includes the VAT due in this period on imports accounted for through postponed VAT accounting.
Box 4 – Includes the VAT reclaimed in this period on imports accounted for through postponed VAT accounting.
Box 7 – Includes the total value of all imports of goods included on your online monthly statement, excluding any VAT.
Sage Business Cloud Accounting
Firstly, ensure you have a supplier record set up for your import agent then select the Is Import agent check box.
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.
The VAT is recorded and then automatically deducted from the same invoice.
(Images taken from Sage.com https://help.accounting.sage.com/en-gb/accounting/brexit/GB-postponed-accounting.html)