VAT Director Rayner Essex
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Brexit reality 1: Importing business goods into the UK

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Jason Croke answers your queries about shipping goods to the EU or receiving goods from the EU, and tries to plug the gaps left by the minimal HMRC guidance.

27th Jan 2021
VAT Director Rayner Essex
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This is the first in a series of articles looking at the new reality for businesses who need to trade goods or services across EU borders. We start with the issues for businesses bringing goods into the UK (imports) as a business to business (B2B) transaction.

Buying goods from the rest of the world

Since the UK left the EU and the transition period ended on 31 December 2020, all goods entering the UK are imports, whether from Austria or Australia.

The default position is that when the goods arrive in the UK, import VAT is due to HMRC. The freight agent will usually pay this import VAT and recharge back to the recipient, plus an admin fee. If the UK business has a VAT deferment account, the freight agent would not pay the import VAT and instead code the import to the business’ deferment account.

Either way, a C79 import certificate will be issued by HMRC around 45 days after the importation. The UK business must retain this certificate as it is proof to reclaim input tax.

Postponed VAT accounting

There is an optional method to deal with the import VAT called postponed VAT accounting (PVA). Here, the freight agent will not pay the import VAT. Instead, the import entry will be coded to PVA and the goods continue their journey without payment of VAT to HMRC.

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Replies (22)

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By aka_bilk
28th Jan 2021 10:44

For a small importer such as my company (less than 100k GBP annually from EU) then
the deferment and CDS routes are probably not worth the hassle. Also because we import
from several EU suppliers, who use a variety of couriers, then you will not always be able to
get each supplier/courier to use deferment or CDS. Probably much easier to just pay the
courier and wait for the C79. We did have our first delivery this week. A small order of
200 GBP value from Holland. UPS knocked on the door and demanded £89. Payment by cash or cheque only and no paperwork to say what the charge was for. Guess they charged us VAT. We do have an EORI number and did give it to the exporter, but looks like UPS were not impressed by that.

Thanks (1)
Replying to aka_bilk:
Jason Croke
By Jason Croke
28th Jan 2021 15:57

The deferment account belongs to you, you quote your deferment account number to your various freight agents, for each shipment of course.

Likewise, for Postponed VAT, you instruct freight agent you are using it and that's all they need to know. You enrol with the CDS in order to print off your monthly import certificates.

But yes, the above are options, it may be easier to just pay the freight agent their fees for paying the VAT on your behalf, that is still a very valid option, certainly easiest.

Thanks (1)
Replying to aka_bilk:
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By dwill
29th Jan 2021 11:46

Exactly the same boat as you.
Small importer of goods (mainly from holland)

We ve had a few deliveries this month from Fedex.
No delay and no VAT to pay so far but I did instruct them to use PVA so Im hoping in Feb I can download those invoices from CDS

As for UPS- I have 2 deliveries from 2nd Jan stuck somewhere between here and holland. Ill be telling all suppliers to use FedEx where possible

In terms of sending goods back into the EU - what do I need to do to ensure the end customer doesnt have to pay anything upon delivery? Any documents I need to be keeping a record of (less than 10% of our business is outside the UK)

Best Article ive read on this sofar, thanks so much

Thanks (1)
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By Accountant101A
28th Jan 2021 10:46

Thank you for all your very useful articles on changes to VAT following Brexit. I have read ALOT of information on this topic and waded through many HMRC emails and it is very rare to find an article that is clearly written with practical advice aimed at people who actually have to deal with these issues in practice rather than theory. Tips like download the MVIPS or the need to register for the CDS are invaluable to us practitioners.

Thanks (1)
Replying to Accountant101A:
Jason Croke
By Jason Croke
28th Jan 2021 16:02

Thanks for your feedback, much appreciated.

The HMRC guidance has been woeful on Brexit, the assumption seems to be every business is already well versed in import/export protocols and going to file their own import declarations and its simply not the case for SME's.

Both Neil Warren and I have some more articles coming shortly, so keep AccountingWeb in your favourites.

Thanks (1)
Caroline
By accountantccole
28th Jan 2021 11:37

Helpful article thanks

Thanks (0)
Replying to accountantccole:
Jason Croke
By Jason Croke
28th Jan 2021 16:02

merci.

Thanks (0)
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By paulgm
28th Jan 2021 14:25

Thanks - this was really useful , concise and practical advice - which seems in short supply from HMRC! You state that to use PVA, we need to have signed up for Customs Declaration Service (CDS) ..... but is it still possible to use PVA if registering imports via CHIEF? Thanks

Thanks (1)
Replying to paulgm:
Jason Croke
By Jason Croke
28th Jan 2021 16:10

Yes, it is still possible.

You can continue to use CHIEF to file your imports.....But you will still need to enrol with CDS to access the MPIVS. You then only use CDS to access your import statements, you don't file imports through CDS, you can carry on with CHIEF.

What's another bit of red tape hey!

Chartered Institute of Taxation confirmed it here in their technical note https://www.tax.org.uk/policy-technical/technical-news/postponed-vat-acc...

Thanks (1)
Replying to Jason Croke:
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By paulgm
28th Jan 2021 16:34

Fantastic, thanks Jason! I actually feel quite a bit closer to understanding all this- i have been going round in circles on this point for a while :-)

Thanks (1)
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By MontyB
29th Jan 2021 12:14

Thank you - I have been going around in circles trying to understand what happens when our EU suppliers opt to occasionally use a fast parcel operator to send us goods - gov.uk is worse than useless on this point.

Thanks (1)
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By dwill
01st Feb 2021 11:04

Where does the value of £135 come into play here?
Currently I purchase goods from EU that range from £50 - £500. Will the process be the same for each of these purchases?
Currently every time I order something from my supplier, they are showing 0% VAT and just marking the invoice as 'VAT passed onto to buyer' - is this correct for both goods over and below £135?
Thanks alot

Thanks (0)
Replying to dwill:
Jason Croke
By Jason Croke
03rd Feb 2021 10:23

The £135 is the threshold where import duty is not due, over £135 and duty is applicable (assuming the goods are subject to import duty of course).

In theory, goods over £135 should be zero rated by seller and customer responsible for the import duty/VAT. Goods under £135 are the sellers responsibility to charge VAT, VAT should not be collected at the dock in UK.

But EU traders are struggling with Brexit as much as UK traders, so I'm seeing all sorts of oddities, I've ordered goods from Alibaba (China) and have received the item despite it showing $12 value (there is no threshold anymore), clearly no sales invoice or sellers VAT number showing on packaging or invoice and I still received it, without paying anything, so the system is probably creaking at the edges and maybe low value stuff is slipping through.

Thanks (0)
Replying to Jason Croke:
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By dwill
04th Feb 2021 09:58

Thanks alot Jason, massively helpful.

Last Q. Where and how do we account for this on the VAT return?

Thanks again for all of your help, its massively appreictaed!

Thanks (0)
Replying to dwill:
Jason Croke
By Jason Croke
04th Feb 2021 13:45

For goods under £135 then I'd hope the Eu seller has correctly charged UK VAT on the invoice to you, you would reclaim this as you would any other purchase. Check the GB VAT number using HMRC VAT number checker https://www.gov.uk/check-uk-vat-number

For goods over £135, then it as per earlier articles on here, you either get freight agent to pay the VAT at dock and you receive a C79 which is your document that allows VAT recovery or f you opt for postponed Import VAT Accounting, you register for CDS, pull off your import statements from there and put the VAT in Box 1 and Box 4 (VAT neutral assuming not partially exempt).

Thanks (0)
Replying to Jason Croke:
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By dwill
04th Feb 2021 14:04

Thanks Jason.
At present my main supplier has just 0% rated all purchases (including those under £135) Ill let them know that they need to address this. I guess nothing else i can do on that front...:-/

Thanks (0)
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By greyman
02nd Feb 2021 11:44

Thanks Jason - a very good article, as were the 'Brace for Brexit' ones.
One area still unclear to me though is with the Duty Deferment Account and how that plays into the Vat return. Assuming we are not postponing VAT as above, then the Vat charged to the DDA is a real payment taken by HMRC (albeit in the month following).
How is this reported and reclaimed through the Vat return, and when?

Thanks (1)
Replying to greyman:
Jason Croke
By Jason Croke
03rd Feb 2021 10:31

If not postponing VAT, your options are either for freight agent to pay the duty/VAT and recharge to you plus admin fee, or you have your own deferment account for the duty/VAT.

In theory you can postpone the VAT and defer the duty so there is nothing to pay at dockside. A deferment account potentially requires a bank guarantee (if over £10k) and banks charge a fee for that service, so if you only need to defer the import duty, because you are postponing the VAT, then you can have a reduced deferment account threshold, maybe even no need for the bank guarantee.

The way you reclaim VAt when using a deferment account is that HMRC will issue a paper document called a C79 certificate, it is a blue/green A4 document printed by what appears to be a typewriter (its a weird font). This is sent about 45 days after the importation and is effectively the "VAT invoice" so once you receive the C79, you reclaim it as input tax (assuming you're not partially exempt).

To recap, you receive an invoice from the seller (no VAT, net goes in Box 7), then later on you receive the C79 from HMRC (VAT, Box 4). HMRC will direct debit the import VAT from your bank account, in theory the timing is such that you are reclaiming the VAT on the C79 at same time as HMRC takes the same from your bank.

Thanks (1)
Replying to Jason Croke:
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By greyman
05th Feb 2021 11:53

Brilliant, thanks Jason (you've answered in a few lines what HMRC's website can't do in a few hundred web pages!)

Thanks (0)
Replying to Jason Croke:
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By Tandal
03rd Mar 2021 16:18

Hi
That was really useful information, can I just ask about the supplier invoice relating to deferred VAT. If the deferred VAT and duty appear on the periodic statement in Febuary but HMRC do not take the payment until March, should the supplier invoice (no VAT) be posted on the AP ledger in Feb or Mar, as if it was Feb then the net purchase amount would automatically be pulled into box 7, but the reclaim for VAT would not be until Mar so the two would not tally up? We do monthly VAT returns.

Thanks (0)
Replying to Jason Croke:
avatar
By Tandal
03rd Mar 2021 16:18

Hi
That was really useful information, can I just ask about the supplier invoice relating to deferred VAT. If the deferred VAT and duty appear on the periodic statement in Febuary but HMRC do not take the payment until March, should the supplier invoice (no VAT) be posted on the AP ledger in Feb or Mar, as if it was Feb then the net purchase amount would automatically be pulled into box 7, but the reclaim for VAT would not be until Mar so the two would not tally up? We do monthly VAT returns.

Thanks (0)
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By adjadj
11th May 2021 18:06

I am late to the table I know. I have read the very clear explanations above and the questions/comments

I think this is what happens to someone who is a humble recipient who operates below the UK VAT threshold and who chooses not to register for VAT.

1) The recipient imports an item and make arrangement to pay the supplier.
2) The supplier ships the goods and declares their import value.
3) VAT and duties where applicable are added to the import value by UK Customs.
3) The VAT and Duty is paid by the freight agent before the good are released
4) The freight agent invoices me for VAT; Duty and their fee
5) I record the value of paid for the goods as Net Cost + Any Duties Paid + VAT on import value + Agent Fee + VAT on agent fee

I would appreciate it if someone could confirm or correct my understanding

Thanks (0)