On the 1st January 2021, the UK will leave the EU VAT scheme. This means import VAT will be charged on all applicable import shipments entering the UK.
What is Postponed VAT accounting?
Postponed VAT accounting (PVA) is a new tax system being implemented within the UK. If your business is registered for VAT you may be able to use PVA to account for import VAT on your VAT Return. This would enable your business to declare and recover import VAT on the same VAT Return rather than paying it upfront at the time of import. It is designed to aid cash-flow for UK companies which may struggle after the transition period ends.
Payment of import VAT
Typically import VAT is paid via:
- Your company deferment account (DAN) – deferring payment for an average of 30 days
Or, if you do not have a deferment account:
- Your intermediary’s (courier or freight forwarder’s) deferment account – which would incur a fee.
The import duty (if any) and VAT would then either be added to your invoice from the intermediary or collected via cash on delivery.
This new PVA system will now give UK importers another option for the payment of import VAT.
To use the new PVA system you will need to advise your intermediary so the import entry can be completed correctly. So, to avoid any delays be sure to advise all your international parcel carriers and freight forwarders well in advance which option you will be using and provide your company VAT, EORI and deferment account number (DAN) as soon as possible.