Exports of goods or services from UK to EU
When exporting goods to the EU, your sales will be treated in the same way that we have previously been treating exports to non-EU countries. Your sale should be zero rated provided that you are not making an indirect supply.
An indirect supply is:
- Supplied to a private individual resident in the UK
- Supplier to a customer with a place of business in the UK producing taxable supplies
- Supplied to a UK customer or a UK address
When exporting services to the EU, your sales will be treated as outside of the scope for UK VAT and therefore will not have any VAT charged to the sale.
Imports of goods from outside UK
When importing goods from outside of the UK, the sale should have been zero rated by your supplier, however import VAT will be chargeable as if the goods were being purchased within the UK. The relevant import VAT can then be accounted for under the postponed accounting rules – this is effectively the same process as a reverse charge which was the standard procedure for EC acquisitions prior to Brexit.
What is postponed accounting?
The postponed VAT accounting system aims to avoid the negative cash flow impact on businesses that are hit by this additional VAT bill and will avoid having goods held in customs until the VAT is paid. Rather than physically paying import VAT and then reclaiming it on the subsequent VAT return, the VAT is accounted for as input and output VAT on the same return – as mentioned previously this is very similar to the reverse charge mechanism.
Use of the postponed VAT accounting scheme is optional. If you wish, you can pay the VAT upfront when the goods enter free circulation in the UK (at the port of entry, for example, or after release from a customs warehouse). However, this scheme has been set up in order to help businesses' cash flow so we would strongly advise you make use of this scheme.
How to account on your VAT Return
The import VAT is accounted for on your VAT Return in three of the '9 boxes' that you need to fill in.
Note that the fast-changing world of Brexit means that some advice you might see about which boxes to complete could be out of date.
The following has been recently confirmed by HMRC:
- Box 1 – VAT due on sales and other outputs: Include the VAT due in this period on imports accounted for through postponed VAT accounting.
- Box 4 – VAT reclaimed on purchases and other inputs: Include the VAT reclaimed in this period on imports accounted for through postponed VAT accounting.
- Box 7 – Total value of purchases and all other inputs excluding any VAT: Include the total value of all imports of goods included on your online monthly statement, excluding any VAT.
You will receive online monthly statements showing the import VAT that has been postponed during the previous month. You should double check that these figures match to the amounts adjusted on your VAT return. Please note that the statement will only show imports where customs declarations have been made. If your imports declaration has been deferred, you need to estimate the import VAT and correct the estimate when you know the correct figure. We advise that you keep copies of these monthly statements in case the information is no longer available, or in case of a HMRC VAT enquiry.
If you don't use postponed VAT accounting, and instead pay the VAT immediately when the imported goods enter free circulation, you will need to complete boxes four and seven only.
If you use cloud accounting software as part of your MTD VAT submissions, depending on your software, amendments to the VAT return boxes may not be possible. If this is the case a journal may be the best way to make your postponed accounting adjustment, if you require help with this please get in touch with us.