UK Imports - Postponed VAT accounting
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.
This article is of interest to all 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.
Broadly speaking, the importer to the UK will pay the import VAT. This may be the UK company or may also be the overseas supplier, depending on delivery terms. Where the overseas supplier is liable for the import VAT, it would generally require a UK VAT registration. Its UK client would therefore pay input VAT on the supply to it.
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. (Typical delivery terms are Delivery at Place (DAP), Ex works or Free Carrier At (FCA)).
There are three options for dealing with the import VAT:
- Freight agent pays the duty/VAT to release the goods and then recharges the duty/VAT back to the buyer, plus an admin fee.
- 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.
- 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 the freight agent knows 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
You need to register for Customs Declaration Service (CDS). This can be done via the following link: enrol for the service or through your government gateway account
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.
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.
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.
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.
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.
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.