Brace for Brexit 2: Postponed accountingby
The law will change for VAT on imported goods from 1 January 2021, but to help businesses postponed accounting will be introduced on the same date.
Postponed accounting will be introduced on 1 January 2021. This will mean that a VAT registered business will not pay VAT on imported goods when they arrive in the UK. The VAT payment will be postponed and instead declared in Box 1 and Box 4 of the next VAT return submitted by the business. The net payment for the goods and any duty will be included in the Box 7 inputs box.
Cash flow boost for business
I have worked in VAT long enough to remember when we last had postponed accounting in the UK before it was abolished in 1984 by Chancellor Nigel Lawson. The abolition produced a one-off cash flow boost of £1bn for the government because it resulted in a time delay between paying VAT at the border and then claiming input tax. The opposite now applies and there will be negative cash flow outcome for the government. An importer that is not VAT registered will still pay VAT when the goods arrive in the UK.
HMRC has made it very clear that trading in goods with EU countries will be the same as for non-EU countries. References to goods sold into the EU as ‘dispatches’ will end, as will the description of ‘arrivals’ for goods coming into the UK.
Does that mean that Boxes 2, 8 and 9 of our nine-box VAT return can be removed after 1 January 2021, because they only relate to EU sales and purchases of goods, which will no longer get special treatment?
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