Postponed VAT Accounting (PVA)

Prior to Brexit the VAT treatment of goods arriving into the UK from the EU (known as acquisitions) or from out with the EU (known as imports) differed.

Acquisitions of goods from the EU required minimal paperwork and they moved freely into the UK without the need for payment of any VAT. The VAT was dealt with by way of Boxes 2 and 4 of the UK business’s VAT return.

Imports from out with the EU however were subject to Customs procedures, more paperwork and the VAT would normally have been payable prior to the goods entering the UK, albeit duty deferment accounts could have been used to speed up Customs clearance procedures and to allow a little extra time for the importer to pay the VAT to HMRC.

As from 1 January 2021 all goods arriving into the UK from anywhere in the world will now be classed as imports.

PVA has been introduced by the UK Government to both ease the pressure at the UK ports when goods enter the UK and to ease the cashflow pressure for businesses by allowing for the import VAT to be accounted for via the VAT return, instead of the importer having to make an actual payment of VAT to release the goods into the country.

There is no formal application required to use PVA but you must tell your agent or freight forwarder that you wish to use it so that the Customs Declaration is properly completed and in turn so it will then generate an online Monthly Postponement Import VAT Statement (MPIVS). This statement can be accessed and downloaded from your online VAT account and then used to declare the import VAT payable in Box 1 of the VAT return covering the period in which the import occurred. If the business can fully recover VAT then the same amount would go into Box 4 as input VAT. Please note that Box 2 (and Box 9) of the VAT return should no longer be used!

If PVA is not used then import VAT will have to be paid before the goods are released in to the UK, and the importer will get a C79 from HMRC (in the same way as it would have for non EU imports prior to Brexit). There is also the option to deal with the import VAT using a duty deferment account, whereby payment is collected by direct debit on the 15th day of the month following the calendar month in which the import occurred.

In both cases, where the business is able to fully recover VAT, this VAT should also be reclaimed via Box 4 of the VAT return.

PVA is equally applicable to goods now imported from non EU as well as EU countries and therefore for some businesses, its use will present a real cash flow advantage.

Please get in touch with Lynn and the team if you’d like to discuss any further queries you may have.