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Postponed VAT accounting

Postponed VAT accounting is a VAT procedure which applies to imported goods. Where goods are imported, VAT is not charged on the VAT invoice but instead is payable at the point of importation.

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Contents

Overview
What are considered imports?
Why should I use postponed VAT accounting?
Who can use postponed VAT accounting?
What type of goods can postponed VAT accounting be used for?
Further information


Overview

  • Import VAT applies to goods transported from GB (not Northern Ireland) and Rest of World to Ireland and EU Member States.
  • Whilst Northern Ireland maintains alignment with the EU VAT rules for goods it will remain part of the UK’s VAT system.
  • The postponed VAT accounting procedure aims to address the impact of import VAT on business’ cash flow.
  • It allows businesses to account for import VAT on their VAT returns rather than the point at which the goods come into the country.
  • There is no application process, and it should be an easy process to use.

What are considered imports?

The following movements are considered the importation of goods:

  • Ireland: Goods transported from Great Britain (not Northern Ireland) and Rest of World to Ireland.
  • Northern Ireland: Goods transported from Rest of World (i.e. countries outside the UK and EU) to Northern Ireland.

Note: Goods travelling from other EU member states / Northern Ireland to Ireland will not be considered imports to Ireland for the purpose of using postponed VAT accounting.


 Although import VAT will apply to goods that enter Northern Ireland from GB, flexibilities within the EU VAT rules have been used to ensure that VAT processes for goods moving to Northern Ireland remain as close as possible to the pre-Brexit position. As such, when purchasing goods from GB, Northern Ireland traders should typically expect to see UK VAT charged on the invoice and as such postponed VAT Accounting will not be relevant in the majority of cases. 

Why should I use postponed VAT accounting?

Many businesses would face significant cashflow problems if they had to pay VAT on goods at the point at which they were imported into Ireland / Northern Ireland, and subsequently had to wait until the VAT return is filed in order to reclaim the import VAT paid. The postponed VAT accounting scheme aims to address the impact of import VAT on business’ cash flow.

Postponed VAT accounting allows businesses to account for import VAT on their VAT returns rather than the point at which the goods come into the country. This means that import VAT may, subject to the usual rules on deductibility, be reclaimed at the same time as the VAT is declared on the VAT return.

If the relevant business has 100% VAT recoverability, this will be a simultaneous "in/out" transaction on the VAT return, removing the need to pay import VAT at the point of importation (i.e. similar to a "reverse charge" transaction on the VAT return).

Cashflow: The primary benefit is the potential cashflow benefit - if a business is entitled to full VAT recovery, the use of postponed VAT accounting will mean that the import VAT is effectively an administrative entry on the VAT return (i.e., the import VAT is accounted for and recovered simultaneously on the same VAT return), avoiding any cashflow implications.

Ease of use: Businesses that chose to use postponed VAT accounting should be able to manage the process relatively easily by using the online statements available from HMRC / Irish Revenue Commissioners and which document the amount of VAT which was postponed under postponed VAT accounting during the period.

There is no application process in order for businesses to be entitled to use postponed VAT accounting.

Please see notes below regarding who can use postponed VAT accounting in order to ensure that it can be availed of.

Who can use postponed VAT accounting?

HMRC guidance states that in order to utilise postponed VAT accounting businesses must merely be registered for UK VAT. Guidance from the Irish Revenue Commissioners states that all accountable persons in Ireland who acquire goods from countries outside of the EU may use postponed VAT accounting.

Care needs to be taken in relation to the following points:

Business purposes: Typically, any VAT registered business can avail of postponed VAT accounting if goods are imported for use in the business. Businesses can also avail of postponed VAT accounting if goods imported are going to be used for both business and non-business use.

It should be stressed that typically where goods are imported solely for non-business purposes, they cannot be imported using postponed VAT accounting (aside from entities which are eligible to reclaim their import VAT through a VAT refund scheme).

Non-established taxable person: A non-established taxable person (NETP) relates to any person who is not normally resident in the relevant country, does not have an establishment in the relevant county and is not incorporated in the relevant country.

HMRC has indicated that NETPs can use postponed VAT accounting, but they are required to use a third party to complete customs declarations (e.g., freight forwarder, customs agent etc.). If an NETP wishes to account for import VAT using postponed VAT accounting, they must tell the third party acting for them to select "Postponed Accounting" and to enter the business’ details as the consignee.

What type of goods can postponed VAT accounting be used for?

Postponed VAT accounting is used specifically for accounting for VAT on the import of goods. All goods which are imported for use in the business can be imported using postponed VAT accounting, however, certain types of goods/traders have additional considerations:

Excise goods: For excise goods, businesses can elect to account for import VAT on their VAT return when the goods are released for use in the United Kingdom. For excise goods such as alcoholic and tobacco products, postponed VAT accounting is used when the goods are released for home consumption.

Consignments under £135: VAT on consignments valued under £135 are not dealt with using the postponed VAT accounting procedure.

Goods in special procedures: Customs special procedures allow traders to store, temporarily use, process, or repair goods and get partial or full relief from import duty / suspension of import duties. If goods have already been declared into a special procedure, it is possible to choose to account for import VAT on the VAT return when the declaration is made that releases the goods into free circulation.

Further information

GOV.UK: Check when you can account for import VAT on your VAT Return.

Irish Revenue: Guidance on using postponed accounting for trade between Ireland and Great Britain.

Irish Revenue: Tax and Duty Manual for tax professionals on postponed accounting.

 

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Article reviewed: April 2023