VAT Director Rayner Essex
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Brexit reality 4: Postponed VAT accounting and VAT return

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HMRC has updated its guidance relating to difficulties obtaining Monthly Postponed Import VAT Statements (MPIVS) which are needed to account for import VAT on VAT returns.

12th Mar 2021
VAT Director Rayner Essex
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Import VAT 

This article concerns itself with GB VAT registered businesses that are importing goods into the UK from anywhere in the world. Those goods, when they enter the UK, will be subject to import VAT. 

Where the overseas supplier is registered for UK VAT, then the overseas supplier will be liable for the import VAT and the GB business would receive a normal GB VAT invoice from the supplier with GB VAT number and GB VAT is charged.

In most other situations when buying goods from the EU or the rest of the world, the supplier won’t be registered for GB VAT. In that case, the UK buyer will be liable for import VAT. 

There are three options for dealing with the import VAT:

  1. Freight agent pays the duty/VAT to release the goods and then recharges the duty/VAT back to the buyer, plus an admin fee.

  2. Buyer has their own deferment account and freight agent uses the buyer’s deferment account to release the goods without payment and HMRC takes the duty/VAT by direct debit around 45 days later.

  3. Buyer is using Postponed Import VAT Account (PIVA) and instructs freight agent that PIVA is to be applied when goods enter the UK, goods are released with freight agent or buyer paying HMRC and buyer accounts for import VAT on their VAT return

All of the above are possible but require the buyer to communicate with the freight agent, so that they know what instructions to follow. If the buyer is not responsible for the shipping, then the buyer needs to ensure the supplier instructs the freight agent as to what basis import VAT will be settled.

Enrol for Postponed Import VAT Accounting

The first matter is to enrol for the service, but how to do so is not obvious. The link takes you to your government gateway login and once logged in, you proceed to answer the questions and then enrolment is achieved. 

If the enrolment fails, it is usually because the address or postcode doesn’t match HMRC’s records, so check your VAT certificate to confirm the address and postcode.

It does not seem possible to log into your government gateway first, there is no menu link or “services you can add” option for postponed accounting, going via the special link first and then logging into the government gateway seems to be the only way to do this.  

Once enrolled, HMRC will send a reminder email each month and the MPIVS will appear on your government gateway home page.

How to use postponed Import VAT Accounting

First, ensure the freight agent knows you want to use it, if they don’t know they will not necessarily default to using it, so avoid surprises by ensuring clear instructions given (to the supplier as well if they are arranging shipping).

Once a month, HMRC will produce your Monthly Postponed Import VAT Statement (MPIVS) which lists all the imports in the previous month, for example, imports in January will appear on the portal from the third week of February.

The MPIVS shows the import VAT that has been “postponed”, and this is declared in box 1 of the VAT return. The figure is also declared in box 4 of the VAT return so the effect of this is VAT neutral, the benefit to the business is no cashflow implications as the VAT is declared and reclaimed on the return. If the business is partially exempt, then box 4 will be subject to the partial exemption calculation. Box 7 (purchases excluding VAT) is populated with the net value of the goods.

VAT Groups

Entities within a VAT group may have their own GB EORI numbers. In such cases to produce a group VAT return may involve downloading the MPIVS from each VAT group entity, and combining them into a single VAT group return.

Estimated VAT

There may be occasions where the MPIVS are not available or VAT returns periods not aligned with MPIVS, HMRC does allow the import VAT to be estimated, but the figure should be corrected on the following VAT return once the correct amount is known.

Accounting records

The MPIVS should be downloaded from the portal and stored carefully, as they are your only record of the import VAT that has been postponed, without the MPIVS statement, your box 1 and 4 figures will not be correct.

The statements are only available online for six months, so it is important they are downloaded in a timely manner.

Certificates C79

The business may still receive forms C79, these are produced when import VAT is not postponed and instead, paid upon arrival by the freight agent or business’ own deferment account. A business may typically see some imports postponed/MPIVS and some imports paid by freight agent/C79.  

Key message

Freight agents must be instructed so they know what to do. Enrolment into PVA and completing the VAT return is straight forward.

HMRC have stated that the first run of MPIVS (covering imports in January) may also include some earlier February imports. This is a glitch and businesses should only reclaim import VAT relating to January and include any February imports on the February VAT return.  

Replies (28)

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Quack
By Constantly Confused
12th Mar 2021 15:59

Have I slipped into an alternate reality or has there been a change?

I've been telling clients to sign up for the Customs Declaration Service to access their PVA figures and several have confirmed that they have been able to do this.

Per the above (and I'm in no way doubting what I'm reading) clients should be signing up for a different service.

Is this an all roads lead to Rome affair where both methods will give the same information, or do I need to be updating clients?

Thanks (0)
Replying to Constantly Confused:
Jason Croke
By Jason Croke
12th Mar 2021 17:28

Love your example, yes it is an all roads lead to Rome scenario.

I was hearing lots of complaints about taxpayers not being able to enrol, some were trying to do it by just going to the HMRC website and getting lost, others were logging into their gateway first and then couldn't find any links, etc. If you Google it there were several different HMRC pages which had different introductory texts and with links that weren't obvious and I journeyed through all of these links myself and you end up at the same place.

So my article has a link that has a big green button you click, log into the gateway and then enrolment is easy.

Clients do need to enrol for the Customs Declaration Service, its just not always been so easy in finding where.

Thanks (1)
Replying to Jason Croke:
Quack
By Constantly Confused
15th Mar 2021 09:56

Thank you Jason.

So the client's I already told to follow the CDS route (assuming they managed to complete the process!) are all still fine, but going forwards your link is clearer and so would be a better one to send to clients to minimise issues with them registering.

So long as I don't need to tell my CDS clients to re-do the process, that was my main worry :)

Thanks again.

Thanks (1)
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By aka_bilk
15th Mar 2021 09:52

Has anyone actually received a C79 yet ?

We certainly have not. It's still the case of the courier company knocks on the door,
demands money for the parcel and then provides absolutely no paperwork.

Thanks (0)
Replying to aka_bilk:
Jason Croke
By Jason Croke
15th Mar 2021 11:19

A C79 is usually only issued where the customer is VAT registered and the freight paperwork has your VAT number/EORI number.

Do you have a GB EORI number and if so, is this on the paperwork from the freight agent?

Thanks (0)
Replying to aka_bilk:
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By MontyB
15th Mar 2021 15:27

Received our first one this morning! Delivery from Fast Parcel courier (UPS) - our supplier gave our EORI number to UPS when they booked the delivery (they forgot to state it should be PVA but it was the first despatch post end of transition period) - we paid the charges in January, C79 arrived by post from HMRC which was a bit of a surprise because I though I would have to download it.

Thanks (1)
Replying to MontyB:
Jason Croke
By Jason Croke
16th Mar 2021 07:31

If freight agent pays the import duty/VAT at the dock/port then you will get a C79 in paper format in the post. If you use postponed import VAT accounting, you get an MPIVS which is digital/download only.

So whether you get a C79 in post or have to download is driven entirely by the freight agent, if they know you are using postponed VAT then they'll tick a box on the paperwork and you get an MPIVS digitally, if they don't know what you want, they will likely just pay the VAT and recharge you and you'll get a paper C79.

Thanks (1)
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By Dream Baby
15th Mar 2021 10:17

We did not wish to use postponed accounting as we foresaw plenty of scope for our freight company and HMRC systems to foul things up, for documentation to be elusive and for phone calls and emails to remain unanswered, partiuclarly during January. Our cash position is fortunately such that we could pay VAT and duty via our monthly deferment. Nevertheless our freight company ignored our request and took the unilateral decision to go for postponed VAT without telling us. I understand they are not the only freight company to have done this. Luckily we long ago signed up for CDS and have finally started to see MPIV statements appear.

Thanks (1)
Replying to Dream Baby:
Jason Croke
By Jason Croke
15th Mar 2021 11:13

Yes, some freight agents are defaulting to using postponed VAT accounting where they have the customers GB VAT/EORI number....which is either incredibly helpful or incredibly annoying.

Defaulting to postponed VAT means the freight agent saves using their own deferment account/issuing invoices/chasing customers and also speed up delivery/stop delays at the port whilst having to ask customer and wait for them to advise whether to use postponed or not.

As with all things tax, every business will have its own way of doing things, so articles like mine here are great at giving an overview in general but one size does not fit all.

Thanks (0)
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By janefg
15th Mar 2021 11:59

My client also does not wish to use deferment when importing and wants the VAT etc to be paid at the time of import. My question is, having done so, how does he reclaim the import VAT? Would it be through the VAT Return? I shall be very grateful for suggestions.

Thanks (0)
Replying to janefg:
Jason Croke
By Jason Croke
15th Mar 2021 13:13

If import VAT is paid at the dock/port by the freight agent, the freight agent will recharge this to your client. As long as your clients GB EORI is on the freight paperwork, then HMRC will issue a paper C79 certificate about a month after the date of import, this will go to the clients address and this C79 is the document that proves they paid the VAT and so can reclaim the VAT in Box 4 as any other purchase.

Client cannot reclaim VAT on the freight agent recharge invoice, they should wait for the C79, so make sure VAT number on documents and that clients business address is up-to-date.

Thanks (0)
Replying to Jason Croke:
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By janefg
15th Mar 2021 16:24

Jason, many thanks. That is very useful!

Thanks (0)
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By piotrkosa
15th Mar 2021 12:12

Hi,
how about transfer of own goods into the UK? If the company is vat registered in the UK but established in the EU should the freight agent prepared documents for export and import or only for export or import and the company should use postponed accounting?
thanks for info

Thanks (0)
Replying to piotrkosa:
Jason Croke
By Jason Croke
15th Mar 2021 13:15

So EU business has a UK VAT number/EORI number. Movement of own stock from EU to UK would see exporter be EU entity with EU VAT number and the importer of record would be EU entity with GB VAT number. onward sale of those goods via the GB VAT return.

The EU entity with GB VAT number can still apply for postponed VAT accounting so that it self-accounts for import VAT on its GB VAT return. There are other ways to structure this, but am posting just one idea.

Thanks (1)
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By jwgrogan
15th Mar 2021 13:39

HMRC guidance has been: "You do not need to register/apply to use PVA. Any UK VAT registered business can use postponed accounting if they meet the conditions:". You seem to be saying that it is necessary to 'enrol' for PVA. Is this a subtle difference from 'applying' for it?

Thanks (0)
Replying to jwgrogan:
Jason Croke
By Jason Croke
15th Mar 2021 22:16

You don't need to register to 'use' postponed VAT, just tell the freight agent and ensure they have your GB EORI and that's all you need to get the import VAT free.

But to account for that import VAT on your return, you need the monthly MPIVS import reports and you get them from enrolling with the Customs Declaration Service.

So it's a subtle, two separate steps approach. I suppose you could guess the import VAT or use any documents the freight agent might send you, but HMRC state you need to download the MPIVS, which suggests the MPIVS are a requirement after all.

Thanks (0)
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By AdShawBPR
15th Mar 2021 13:59

I think you have to enrol in the CDS to get the statements. You don't need to enrol to actually tell the supplier you want to use PVA. That's my take anyway! Practically, when the accounting entry for the invoice is made, in most cases the statement from HMRC will not have been received. I use Xero for most clients and will want only one pass at entering the transaction. I'll therefore be entering the bill as a revese charge expense which will lead to the correct entries on the VAT Return. Presumably I should then check that this agrees to HMRC's statement although as I have no partially exempt clients, there is no impact on the net VAT due. Now, what would be nice, now we have MTD, is if HMRC could pre-populate this VAT data so I wouldn't have to worry about it!

Thanks (1)
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By [email protected]
15th Mar 2021 15:33

Thanks Jason.
Your reply about the EU entity with GB VAT Registration makes it easily understandable.
So should an EU entity with GB VAT number when selling goods to UK businesses, charge VAT to customers?

Thanks (0)
Replying to [email protected]:
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By jwgrogan
15th Mar 2021 22:31

Yes, if EU entity has shipped stock to itself in UK, it subsequently makes domestic UK sales from GB VAT Reg to customer VAT Reg, same as pre-Brexit.

Thanks (2)
All Paul Accountants in Leeds
By paulinleeds
15th Mar 2021 23:21

The practical thing that I understand about PVA, and after reading many articles from software providers on how to deal with it through their software, is that when you enter the purchase invoice or payments into your software you have to note that it is a reverse charge transaction and therefore your software puts the required entries into boxes 1, 4 and 7 of the VAT return.

I have also read articles that say that you have to build up the amounts in box 1 and 4 amounts on a transaction by a transaction basis and that you can’t just do a single journal adjustments / manual entry at the end of the month or quarter to account for the amounts in boxes 1 and 4. That accords with the underlying concept of MTD for VAT i.e. no manual rekeying of data after transactions have been entered in to your accounting records.

I have registered several clients for the CDS system and I have successfully downloaded the Monthly Postponed Import VAT Statements (MPIVS).

Even though my client has only several transactions, and totals are shown on the MPIVS for each supplier and port of entry into the UK, I cannot reconcile the totals on the statement to underlying purchase invoices. As my client only has a handful of transactions I do not know how larger businesses will cope.

The article by Jason, and others that I have read, suggests that we should make a Manual adjustment at the end of the VAT quarter using the totals shown each month on the statements.

I appreciate that just because a purchase invoice has been issued does not mean that the goods have entered the UK in the same month and therefore the import VAT would not be due based on the purchase invoice date. Without a detailed list of every purchase invoice/transaction how an earth are we going to practical use these MPIVS each month, unless we simply enter the month end / quarter end adjustments directly from the statements, but that undermined MTD VAT returns totals being built up by individual transactions.

I’d appreciate others thoughts!

Thanks (1)
Replying to paulinleeds:
Jason Croke
By Jason Croke
16th Mar 2021 07:27

Even with the C79 it was not always easy to match up the import with the purchase invoice, if there was only a couple of invoices per month then it was easy enough to match. Where there were several entries it was a case of auditing the C79 entry back to the freight agent paperwork and in turn to the purchase invoice from the supplier.

If you go to page 13 of this link, it states that C79 can be input manually and not seen as breaking the digital link. This guidance is from 2020 so MPIVS didn't exist back then but MPIVS serve the same purpose.
https://www.att.org.uk/sites/default/files/Makin%20Tax%20Digital%20Updat...

Thanks (0)
Replying to Jason Croke:
All Paul Accountants in Leeds
By paulinleeds
16th Mar 2021 11:35

Thank you Jason for your comments.

With the C79 procedure, my clients are provided with a dated invoice from the freight company. This requests payment from the client and also provides the required VAT invoice. Each invoice is entered into the accounting software transaction by transaction. Whilst I do check that I have a VAT invoice to go alongside each C79 certificate entry, to make sure we've actually recovered the VAT, that can be lost within other net charges on the invoice, the C79 certificate then becomes somewhat superfluous.

This is not the same with MPIVS. There is no invoice produced by the freight company.

I have a read detail articles and watched short videos produced by Sage (for Sage 50c) suggesting that businesses no longer use tax code T8 (for goods imported from the EU into UK) and instead use a different tax code e.g. T18 for all PVA transactions. In summary, allocating a tax code against each invoice transaction makes the software gross up boxes 1 and 4.

Whilst the members on AccountingWEB do tend to slate Sage, I would have expected such a large company to have not suggested dealing with this on at transaction by a transaction basis if the simple answer was to make a single manual adjustment at the end of the VAT quarter for 3 amounts on MPIVS.

I do believe that Sage have really complicated the matter further, and created a mountain out of a molehill. Their suggested tax code actually creates two entries into your software to get amounts into box 1 and box 4. I have found an easy way, by using the reverse charge tick boxes within setting, which were previously used for general reverse charge transactions. This new facility is only available within the latest version of Sage, therefore effectively requiring customers to upgrade to the latest version. I don’t wish to change the this article into one commenting on Sage software. I would however be interested in what other subscribers to AccountingWeb do within their own software.

Thanks (1)
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By jamesmarson
19th Mar 2021 14:27

Has anyone been able to obtain their February PIVA statement yet? Our January statements were available by around 6 February. I’m aware that there are delays and issues at the moment... but have any February statements been issued?

Thanks (0)
Replying to jamesmarson:
Jason Croke
By Jason Croke
19th Mar 2021 14:51

https://www.gov.uk/guidance/complete-your-vat-return-to-account-for-impo...
HMRC have acknowledged there have been some computer gremlins in February. Worth book marking the above link as it seems HMRC will communicate problems here.

Thanks (1)
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By jameson1991
06th Apr 2021 10:51

How do you actually get the postponement VAT figures INTO your VAT return? There is no guidance on this anywhere? I do not want to post as an invoice etc or manually adjust the return. Does anyone have an idea ?

Thanks (0)
Replying to jameson1991:
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By elgrecominis
27th Apr 2021 14:39

jameson1991 wrote:

How do you actually get the postponement VAT figures INTO your VAT return? There is no guidance on this anywhere? I do not want to post as an invoice etc or manually adjust the return. Does anyone have an idea ?

That's actually my question too, as there is no actual invoice, just the statements or the Acceptance Advice from the courier. We use Quickbooks and am hoping our accountant will throw some light about the entries required.

We did NOT opt for PVA, but one of the couriers just listed us on the PVA scheme. So while most others send us the invoice after delivering the parcel, this particular one just sent everything to HMRC. Alarm bells starting ringing by mid-February after we had received about 4 shipments but no Import VAT invoices. Emails and phone calls unanswered by the courier so totally at a loss what to do next.

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By Craig66
07th Apr 2021 10:40

Hi there, what if your EU supplier is supplying you under Incoterms of DDP (delivered duty paid)?
They are responsible for the import vat and duties aren’t they?
Do we just enter the converted invoice value in box 7 then and that’s it?
We have 2 specific suppliers
1 in NL who has a GB EORI and invoices us zero rated in € and uses DDP Incoterms
1 in France who doesn’t have a GB EORI and invoices us zero rated in € but uses UPS courier for deliveries and supplies DDP Incoterms.
Do I just process their invoices as purchases as the VAT etc has already been paid by the supplier?
Or, are we likely to get landed with a bill down the line? We haven’t received any charges so far and the goods have cleared customs and been delivered to our customers.

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By HanLA
26th Oct 2021 11:47

We have received the C79's and postponed VAT letters. We have noticed not all our imports are listed on this. Why is this and how should we be reporting this to HMRC?
It seems to be two suppliers specifically.

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