There have been significant changes in how the UK handles value-added tax following Brexit, with the introduction of a deferred import VAT scheme known as postponed VAT accounting or PVA.
This new scheme allows traders to import goods into the UK without making a cash payment of import VAT. A UK VAT return can be used to record this, which is a requirement for all UK VAT registered businesses regardless of if they are resident or non-resident.
Learning about import VAT after Brexit is important because it could make for a more financially beneficial setup for traders. In this article, we’re going to find out what PVA accounting is and whether or not PVA accounting is right for you.
What is PVA?
Postponed VAT accounting (PVA) is a new process that can be used to account for import VAT. This is a scheme that was introduced on 1st January 2021 and offers traders considerable utility when it comes to VAT.
PVA works by deferring import VAT payments when goods are imported into the UK. The VAT can be reclaimed on a VAT return, which essentially allows you to declare and reclaim import VAT on the VAT return.
This means that there is no cash transferred and there is a neutral liability in terms of VAT.
Should I use PVA?
PVA Accounting is a useful way for UK VAT registered importers to claw back import VAT and account for it in their VAT returns. It is now a permanent fixture in the VAT framework, so it’s likely that most businesses will opt-in for this scheme. There are a number of benefits associated with it, including cash flow advantages when compared to paying for import VAT upon import arrival.
Of course, it isn’t an ideal solution for everyone and different rules will apply to different scenarios. If you delay your customs declaration, for example, then you have to account for import VAT on your VAT return.
How do you access PVA statements?
For traders that use a deferred import VAT payment method, a postponed import VAT statement can be accessed online for all imports that were opted into the postponement of import VAT via customs clearance.
These statements outline all of the import VAT that has been postponed for the month prior. Statements are made available in the first half of every month and remain available for 6 months.
For the sake of record-keeping, it’s a good idea to download and save these statements. The statements can be accessed through the customs declaration service customs system.
If traders still use the CHIEF system, then they will need to register with the CDS customs system to receive PVA statements.
How to use PVA statements for import VAT returns
You can use your PVA statements for reporting purposes on monthly or quarterly UK VAT returns. To gather this information, follow the steps below:
• In box 1, you will find the total VAT due in a given period on any imports pushed through PVA.
• In box 4, you can view the total VAT that has been reclaimed over a given period on imports pushed through PVA.
• In box 7, you can see the total value of all imports found on your online statement, excluding VAT.
Traders have the ability to account for import VAT in the following scenarios:
1. If the goods are for business purposes
2. If the GB or XI EORI number has been used during customs declaration
3. If a UK VAT registration number is included during customs declaration
In instances where traders initially declare goods via a customs special procedure, import VAT can be accounted for in VAT returns at the declaration stage. This releases those goods into free circulation from a select few procedures, which are:
- Customs warehousing
- Inward processing
- Temporary admissions
- End-use goods
- Outward processing
- Duty suspension
Traders have the ability to account for import VAT on their VAT returns if they release excise goods that are to be used in the UK. This is known as goods that are released for home consumption and includes goods that are released from excise warehouses after a period of duty suspense.
It is also worth noting that e-commerce sellers (or marketplaces such as Amazon or eBay) charge VAT at the point of sale on any imported goods that don’t exceed £135. This replaces payments for import VAT. However, any existing VAT exemptions for parcels that don’t exceed £15 have been removed.
Confused by PVA Accounting? We Can Help!
If you are confused by Postponed VAT accounting, Your Ecommerce Accountant can help.
- VAT Registration
- Preparing MTD VAT filings
- VAT Expenses & Claims
- Monitoring VAT thresholds
- Advice on selling goods to the EU including distance selling VAT