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Post-Brexit VAT changes to importing goods.
What’s changing about Import VAT?
As a result of Brexit, new import tax rules need to be followed on goods imported from the EU.
VAT must be applied on all imports from the EU of £135 or more, and it is applied at the time the goods are imported.
If you are a VAT registered business then you may be able to reclaim this VAT. If you are not VAT registered, you cannot reclaim the VAT, though you still need to pay it.
How do I claim Import VAT back?
There are three options to reclaim the Import VAT on goods.
Firstly there is the traditional method, where the business importing the goods pay the import VAT to clear the goods, and then receives a C79 certificate to claim the VAT back on the VAT return.
The method is to use a VAT deferment account. Using this option you can defer the VAT payments and then pay once a month for all the goods you’ve imported. This then also requires a C79 certificate to reclaim the VAT on the imported goods.
Thirdly is the Postponed Import VAT Accounting procedure (PIVA). This was introduced in January of 2021. It allows the importing business to wait to pay the VAT and instead declare the VAT and claim in on the next VAT return.
What is PIVA?
Postponed Import VAT Accounting (PIVA) is the only one of the three options that don’t require the C79 certificate from HMRC to support your VAT return.
You do, however, need to download your monthly VAT statements and keep them as they’re only available for six months through the online portal.
It also doesn’t require you to actually pay the VAT before claiming it back. Instead, you account for both the VAT due and claiming back the VAT at the same time on the same return.
If the VAT you’ve deferred has not yet appeared on your monthly statement, you must estimate the VAT on your VAT return, and then correct any difference in the next VAT return.
This has the benefit of improving cash-flow, as whilst you won’t be claiming the VAT total back from HMRC, you didn’t actually pay it out in the first place.
The biggest drawback of PIVA will be the increased administration using this method, however, it may be that the cash-flow benefits make this system the most attractive.
Your business may be able to access funding from the SME Brexit Support Fund, which aims to help small and medium sized business adapt to the new import rules through a grant of up to £2,000. The application deadline is the 30th June 2021.
If you want to reclaim your import VAT then you will need to apply for an EORI number. If you are moving goods to or from Northern Ireland you will need to apply for an EORI number starting with XI.
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