Accounting for import VAT from 1 January 2021

From 1 January 2021, UK VAT registered organisations will be able to declare and recover import VAT on the same VAT Return. This accounting practice is known as postponed VAT accounting and will change the way that organisations complete the VAT return from 1 January. It is voluntary to use it and, if you decide to do so, there is no need to apply to or inform HMRC ahead of time.  

Completing the VAT Return

If choosing to use postponed accounting, organisations must account for the import VAT in the VAT return for the accounting period which covers the date they imported the goods. For example, if the organisation has calendar quarter returns then goods imported on 2 February 2021 must be accounted for in the March 2021 VAT return.

The VAT return boxes will need to be completed as follows:

• Box 1 – import VAT due for period. Access to this information will be via the Monthly Postponed Import VAT Statement or, if during the first six months of 2021 you have taken the option to delay your customs declarations, it will be necessary to estimate the amount of import VAT due.
• Box 4 – include the import VAT incurred in this period, with recovery subject to the normal rules for input tax. If you are a fully taxable business, the amount of import VAT in this box will equal that in box 1.
• Box 7 – the total net value of all imports of goods in the accounting period (i.e. the VAT exclusive amount).

Monthly Postponed Import VAT Statement (MPVIS)

VAT registered organisations will select that they will be using postponed accounting to declare their import VAT on the customs declaration. As the CHIEF system is no longer available to importers, organisations must select that they will be using postponed import VAT accounting as follows.

Declarations via Customs Declaration Service (CDS)

• Enter your VAT registration number at header level in data element 3/40.
• Importers may also enter “role code” FR1 as the first component of the Data Element (please note, this is optional).

On successful completion of the CDS import declaration, the C88 should be presented as follows:

FR1 GBXXXXXXXXX PVA

If you are acting as a representative for someone, the EORI or VAT number used must be that of your client.

Following the correct completion of the customs declaration, a MPVIS will be generated which shows the total import VAT payable in a month. Statements will be available to view in the first half of each month. For example, a MPVIS will be available for download in the first half of February 2021 for imports of goods made in January 2021. It is important to note that you will only be able to access MPVIS for six months from the date of publish. Therefore organisations must ensure than they download the statements and save them locally each month.

A mocked copy of the MPVIS, provided by the CIOT, can be found here.

What happens if organisations delay their customs declaration?

Organisations that import non-controlled goods into Great Britain from the EU between 1 January and 30 June 2021 and delay the customs declaration must still account for the import VAT due. This can be achieved via postponed accounting but to complete the VAT return, organisations will need to estimate the import VAT due using their import records.

When the organisation submits the delayed declarations they must select that they are accounting for import VAT on the return (as per the process outlined above). The next MPVIS to be generated will then show the amount of import VAT due for those transactions. It’ll then be necessary to:

• compare these values against your estimated import VAT amounts
• account for any differences on your next VAT return.

How to estimate import VAT on the VAT Return?

Organisations should look to make the estimate of import VAT as accurate as possible. As a starting point the VAT value should be based on the amount paid for the goods plus any other costs they have agreed to cover (i.e. packaging, transport or insurance). It should also include any customs duties due.

Next steps

If you would like to use postponed accounting it will be important to convey that point to the party which is completing the customs declarations for your organisation. They will need to know your VAT number or EORI to ensure that the correct notifications are given to HMRC and hence, the import VAT recorded on the MPVIS.

Changes should also be made to the VAT return processes currently in place. Those responsible for completion of the VAT return will need to ensure that the import VAT is captured correctly, including the evidence to support those amounts (i.e. a valid estimate or the downloaded MPVIS form).

If you would like to discuss this issue further, please contact Robert Marchant or your usual Crowe contact.