Postponed VAT Accounting (PVA)
What is Postponed VAT accounting? PVA gives companies the option to account for and recover VAT on imported goods on the same VAT return instead of paying the VAT upfront then awaiting a C79 to recover.
The importer based in Great Britain will treat itself as both the supplier and recipient of the relevant goods on the same return, meaning there is no physical cash outflow.
An online monthly statement from HMRC will be available for businesses to download and retain. It will show the total import VAT postponed for the previous month. The figure from the relevant monthly statements should be included on the next monthly or quarterly VAT return. Clients must sign up to have use PVA accounting on https://www.gov.uk/guidance/get-your-postponed-import-vat-statement. These statements will only be available for 6 months so it is really important clients download these and keep in their records.
Their VAT return for this transaction will then be:
- Box 1 – Total VAT due in this period on imports accounted for through postponed VAT accounting.
- Box 4 – Total VAT reclaimed in this period on imports accounted for through postponed VAT accounting.
- Box 7 – Total value of all imports of goods included on your online monthly statement, excluding any VAT.
Note the normal rules on what VAT can be reclaimed as input tax will still apply, so if you are partially exempt for VAT purposes there will be a net cash outflow.
A business can account for import VAT as described above if:
- the goods are for use in its business;
- the business includes its EORI number, which starts ‘GB’ on its customs declaration; and
- the business includes its VAT registration number on its customs declaration, where needed.
- If goods are initially entered into a Customs special procedure, the business can account for import VAT on its VAT Return for the period when the declaration that releases those goods into free circulation is submitted.
The guidance confirms that business-to–business sales not exceeding £135 in value will also be subject to the new rules. However, where the business customer is VAT registered and provides its registration number to the seller, the VAT will be accounted for by the customer by means of a reverse charge.
Xero has come out with a PVA option button which can be selected when creating a VAT return. You just add the amount from the Monthly Postponed Import VAT Statement (MPIVS) and Xero will automatically populate it into the correct boxes.
If you have any questions or need any assistance please contact Yvonne Collings at [email protected] or you can call her on 01243 782 423.