Importing goods into the UK can be costly and complex, especially when it comes to managing import VAT. Since Brexit, businesses face new rules requiring VAT payment on imported goods, which can strain cash flow and slow down operations. Postponed VAT Accounting (PVA) offers a smarter solution, allowing businesses to delay payment of import VAT at the border and instead declare and reclaim it in the same VAT return.
This system not only eases cash flow pressures but also streamlines the import process, helping your business save time and money. If you import goods regularly, understanding how postponed VAT accounting works could transform the way you handle VAT and improve your financial efficiency.
What is Postponed VAT Accounting?
Postponed VAT Accounting (PVA) is a UK government scheme that allows VAT-registered businesses to declare and reclaim import VAT on their VAT return rather than paying it upfront at customs. Traditionally, when goods are imported into the UK, whether from outside or, since Brexit, even from the EU, import VAT must be paid immediately upon arrival.
Under the PVA scheme, instead of paying this VAT at the border, businesses can postpone the payment and account for the VAT on the same VAT return period. This process is also known as the import VAT reverse charge mechanism, where the VAT on imports is treated similarly to domestic reverse charge VAT accounting.
The main advantage is that the VAT payment and reclaim happen simultaneously, resulting in no net cash flow impact for fully VAT-registered businesses. It is important to distinguish postponed VAT accounting from import VAT deferral. While deferral means delaying the payment of import VAT to a later date, postponed VAT accounting means declaring VAT as both due and deductible on the VAT return in the same period, effectively making the VAT cash-neutral.
Businesses in Northern Ireland, however, follow slightly different rules. Since Northern Ireland remains part of the EU VAT territory for goods, import VAT is not usually payable on goods coming from the EU, but PVA applies for imports from other countries.
If you need expert help navigating postponed VAT accounting rules and ensuring compliance, our VAT Services can guide you every step of the way.
Why Use Postponed VAT Accounting? Benefits Explained
Postponed VAT Accounting offers several key benefits to UK businesses, particularly those that regularly import goods:
1. Improved Cash Flow
By postponing the payment of import VAT until your VAT return is filed, you avoid making upfront payments at the border. This can significantly ease cash flow pressures, allowing your business to use funds elsewhere until VAT is reclaimed simultaneously.
2. Avoid Customs Delays
Without PVA, customs agents or couriers usually pay import VAT upfront on your behalf and then invoice you, often within seven days, including additional fees. If you fail to pay promptly, your goods may be held in customs, causing costly delays. PVA removes this risk by allowing goods to clear without immediate VAT payment.
3. Simplified VAT Recovery
Instead of waiting for C79 certificates from HMRC (which prove import VAT paid and enable reclaiming it on VAT returns), the PVA system integrates import VAT directly into your VAT return. This streamlines administration and reduces errors or missing paperwork.
4. No Need for Upfront Funds
Particularly useful for smaller businesses or those with tight liquidity, PVA means you don’t need to set aside cash upfront to cover import VAT, freeing capital for other business activities.
How Does Postponed VAT Accounting Work?
To take advantage of postponed VAT accounting, businesses need to complete several steps:
Step 1: Obtain a GB EORI Number
Before you can use PVA, you must have a GB Economic Operators Registration and Identification (EORI) number. This unique identifier is essential for customs declarations in the UK. If you don’t already have one, you can apply through HMRC. Your EORI will usually be your VAT number followed by three zeros.
Step 2: Register for the Customs Declaration Service (CDS)
Next, register for access to the Customs Declaration Service, the system HMRC uses to process customs declarations. Registration requires your incorporation number, incorporation date, business address and postcode, and VAT number. It’s important to use the postcode on your VAT certificate rather than your company’s registered address if they differ, to avoid errors.
Step 3: Inform Your Customs Agent
When importing goods, make sure your freight agent or customs broker knows you want to use postponed VAT accounting. They will include your GB EORI number and VAT registration number in the customs declaration and enter ‘G’ in box 47e as the method of payment for import VAT. This authorises the postponement of the import VAT payment.
Step 4: Receive Monthly Postponed Import VAT Statements (MPIVS)
Each month, HMRC publishes a statement summarising all import VAT postponed during that period. You can download this statement from the HMRC website within six months of the statement date. It’s essential to keep these statements as part of your VAT records and use them to complete your VAT return accurately.
Declaring Postponed VAT on Your VAT Return
Once you have postponed the import VAT at customs, you need to reflect this on your VAT return during the same accounting period as the import took place. The process follows the reverse charge mechanism, which means you declare the import VAT as both due (output VAT) and reclaimable (input VAT).
So, the net effect on your VAT payment is zero—provided your business is fully entitled to reclaim VAT.
Here’s how to complete your VAT return when using PVA:
- Box 1: Include the total import VAT due during the period, which you find on your monthly postponed import VAT statement (MPIVS). This represents the output VAT on imports.
- Box 4: Include the same amount as reclaimable input VAT. This reflects the VAT you are reclaiming on those imports.
- Box 7: Enter the total value of your imported goods, excluding VAT. This helps HMRC track the value of goods you have imported during the period
If your business is partially exempt (i.e., cannot reclaim all VAT input), you must still declare the full import VAT in Box 1, but the reclaimable amount in Box 4 will be adjusted according to your partial exemption calculation.
Setting Up Postponed VAT Accounting
To set up PVA, follow these key steps:
- Get Your GB EORI Number:
Apply for your EORI number through HMRC if you don’t already have one. It usually resembles your VAT number with three zeros appended. - Register for the Customs Declaration Service:
Visit HMRC’s website and register for CDS. Be prepared to provide your company’s incorporation number, incorporation date, business address, and VAT number. Ensure the address matches your VAT certificate to avoid registration errors. - Use Your EORI and VAT Numbers on Customs Declarations:
Make sure your customs agent includes your EORI and VAT registration numbers on import declarations and selects the postponed VAT accounting payment method. - Download Your Monthly Statements:
Log in to HMRC’s system monthly to access your postponed import VAT statements (MPIVS). Download and save these for your records and VAT return preparation.
Example of Postponed VAT Accounting
To illustrate, imagine Company A imports goods worth £200 with import VAT of £40. During the same VAT period, Company A also sells goods worth £400 (charging £80 VAT) and buys goods domestically worth £100 (£20 VAT paid).
Using postponed VAT accounting, Company A’s VAT return would look like this:
| Box Number | Description | Amount (£) |
| Box 1 | VAT due on sales and postponed import VAT | 120 |
| Box 4 | VAT reclaimed on purchases and imports | 60 |
| Box 5 | Net VAT to pay (Box 1 minus Box 4) | 60 |
| Box 6 | Total value of sales excluding VAT | 400 |
| Box 7 | Total value of purchases excluding VAT | 300 |
Notice how the £40 import VAT is included both in Box 1 and Box 4, cancelling each other out in terms of cash flow, while being properly declared for VAT accounting.
In Closing
Postponed VAT Accounting is a valuable scheme that can save UK businesses significant time and money by simplifying import VAT payments and easing cash flow burdens. By allowing you to declare and reclaim import VAT on the same VAT return, it eliminates upfront VAT payments at customs and avoids delays in goods clearance.
If you regularly import goods into the UK, setting up PVA is straightforward and can greatly enhance your business’s financial efficiency. Make sure to register for your EORI number, sign up for the Customs Declaration Service, and keep accurate monthly import VAT statements to fully benefit from this scheme.
FAQs
Q1: Is Postponed VAT Accounting Mandatory?
Ans: No. The scheme is optional. Businesses may choose to pay import VAT upfront at the border and reclaim it later via C79 certificates if preferred.
Q2: Who Can Use Postponed VAT Accounting?
Ans: Any UK VAT-registered business importing goods can use PVA without special application. Northern Ireland businesses use the scheme for non-EU imports.
Q3: What Records Should I Keep?
Ans: Keep all monthly postponed import VAT statements from HMRC. These are essential for your VAT return and audit purposes.
Q4: What If I Don’t Use Postponed VAT Accounting?
Ans: You must pay import VAT upfront at customs, usually through your freight agent, who will invoice you and may charge extra fees. You reclaim this VAT on your next VAT return after receiving a C79 certificate.
