UK Postponed VAT Accounting: A Business Guide

1. What is Postponed VAT Accounting (PVA) and how does it benefit businesses?

Postponed VAT Accounting (PVA) is a system that allows UK VAT-registered businesses to manage import VAT directly on their VAT return, rather than paying it upfront at the point of entry into the UK. This offers significant cash flow benefits, as businesses avoid the immediate payment of VAT on imported goods. By accounting for import VAT on the same VAT return where it’s simultaneously declared as output tax and reclaimed as input tax, PVA effectively creates a “net effect” of zero on the VAT due to HMRC, eliminating the need for a separate payment and subsequent reclaim. This streamlines the VAT process and reduces upfront costs for importing businesses.

2. How do businesses set up and use Postponed VAT Accounting (PVA)?

There is no formal application process for Postponed VAT Accounting (PVA). To use PVA, a business simply needs to confirm their choice on their customs declaration. For declarations made using the CHIEF system, this involves entering the GB EORI number in Box 8 or 44h and using method code ‘G’ in Box 47e. For declarations made through the CDS system, the VAT registration number should be provided in data element 3/40 at the header level. It’s crucial for businesses to inform their customs agent or third party if they wish to use PVA and retain written confirmation of this agreement, as declaration choices cannot be amended after submission. Businesses also need to be registered for the Customs Declaration Service (CDS) to access their monthly PVA statements.

3. How do businesses complete their VAT return when using Postponed VAT Accounting (PVA)?

When using Postponed VAT Accounting (PVA), businesses must account for import VAT on their VAT Return for the accounting period in which the goods were imported. They will need details of any customs entries made in their own records and copies of their monthly postponed import VAT statements. Unless customs declarations are delayed, the monthly statement (usually available by the 6th working day of the month) will show the total import VAT postponed for the previous month.

Specifically, businesses should:

• Box 1: Include the VAT due on imports accounted for through PVA, using information from the online monthly statement or an estimate if the declaration was delayed.
• Box 4: Include the VAT reclaimed on imports accounted for through PVA, again using the monthly statement or an estimate for delayed declarations.
• Box 7: Include the total value of all imported goods for the period, excluding VAT.

For businesses using the Flat Rate Scheme, import VAT accounted for through PVA should not be included in their flat rate turnover but added to Box 1 separately. The VAT Cash Accounting Scheme cannot be used for imported goods under PVA.

4. What are the key differences between Postponed VAT Accounting (PVA) and the C79 method for import VAT?

The two primary methods for accounting for import VAT in the UK are Postponed VAT Accounting (PVA) and the C79 method. The main difference lies in the timing and cash flow implications of VAT payment.

• C79 Method: Under this method, the courier or freight forwarder pays the import VAT on behalf of the business at the border. This VAT is then recharged to the business via an invoice before the goods are delivered. HMRC subsequently issues a C79 certificate (either by post for CHIEF declarations or online for CDS declarations) which, along with the courier’s invoice, allows the business to reclaim the VAT on their next VAT return. This method requires an upfront payment of VAT, potentially impacting cash flow.
• PVA Method: PVA allows businesses to “postpone” the import VAT, meaning it is not paid at the border. Instead, the VAT is declared as both output and input tax on the same VAT return, resulting in no cash flow impact as there is no upfront payment and subsequent reclaim. This method requires access to monthly postponed import VAT statements online.

Since March 30, 2024, all customs declarations for both C79 and PVA methods must be made through the Customs Declaration Service (CDS).

5. How can businesses access their monthly Postponed Import VAT Statements and what if entries are missing?

Businesses using Postponed VAT Accounting (PVA) can access their monthly postponed import VAT statements online, typically by the 6th working day of the month. To do so, they need a Government Gateway user ID linked to their EORI (Economic Operators Registration and Identification) number. These statements show the total import VAT postponed for the previous month, unless a customs declaration was delayed.

If specific entries are missing from a monthly statement, businesses should:

• Check if the entry appears on a statement for another closely related company or a member of their VAT group.
• If a customs agent or third party handled the declaration, ask them to confirm that the import VAT was correctly allocated to the business’s EORI number. Statements older than six months are archived and cannot be retrieved by an agent.

6. What are the rules for correcting errors related to import VAT, especially when using PVA?

The rules for correcting import VAT errors depend on whether Postponed VAT Accounting (PVA) was used for the original declaration.

• When PVA was NOT used (VAT treated as customs duty): If an overpayment of import VAT is identified (e.g., due to an incorrect rate or missed relief), the business can adjust their VAT return to reclaim the overpaid amount under Regulation 121E of the VAT Regulations 1995, provided the claim is within four years of the accounting period of import. These initial adjustments are not subject to the standard VAT error correction rules (Regulation 34 and associated thresholds, e.g., the £10,000 or £50,000 limits) because the VAT was collected as if it were a customs duty outside the VAT return. However, if a later amendment to this adjustment is needed, it would then be treated as a correction of an error on the VAT return and would fall under Regulation 34 and the normal error correction notice (ECN) rules. For underpayments, form C2001CDS should be used, not the VAT return.
• When PVA WAS used (VAT declared on VAT return): If an error leads to an overpayment of import VAT when PVA was used, the error originates from a declaration on the VAT return as output tax. Therefore, this error is caught by Regulation 34 and is subject to the normal ECN rules and error thresholds (£10,000 / 1% of Box 6 or £50,000 limits). If the error value exceeds these thresholds, an ECN must be submitted to HMRC using form VAT652. If the error is below the thresholds, it can be corrected by adjusting the current or next VAT return.

The time limit for correcting most VAT errors, including those related to import VAT, is generally four years from the end of the accounting period in which the error occurred. Deliberate inaccuracies must always be notified to HMRC using form VAT652, regardless of size.

7. What kind of support is available for businesses regarding customs processes and PVA?

Various resources and helplines are available to assist businesses with customs processes and Postponed VAT Accounting (PVA):

• Official Government Guidance: Comprehensive information can be found on GOV.UK, including detailed rules on using PVA, accessing statements, and completing VAT returns.
• Online Tutorials and Webinars: HMRC and other platforms offer YouTube videos and webinars on customs declarations, staged controls, and trader responsibilities.
• Customer Forums: Online forums allow businesses to ask specific questions and share experiences with peers.
• Customs and International Trade Helpline: A dedicated helpline (0300 322 9434) is available Monday to Friday (8am-10pm) and weekends (8am-4pm) for expert advice on importing, exporting, and customs reliefs.
• Specific Mailboxes: For Government Gateway issues, Cash Account problems, or CDS operational queries, dedicated email addresses are provided.
• Trader Dress Rehearsal (TDR) service: A free, simulated environment mirroring the Customs Declaration Service (CDS) where businesses can practice submitting declarations with real account data without financial impact.

8. What is the Customs Declaration Service (CDS) and its significance?

The Customs Declaration Service (CDS) is the UK’s single customs platform, replacing the older Customs Handling of Import and Export Freight (CHIEF) system. As of March 30, 2024, all businesses must declare goods through CDS for both C79 and Postponed VAT Accounting (PVA) methods.

Key aspects of CDS include:

• Mandatory Subscription: All traders, even those using brokers or software providers, must subscribe to CDS to access their customs financial accounts, view statements, and manage duty deferment accounts.
• Data Elements: CDS uses a more detailed system of “data elements” instead of CHIEF’s “box numbers” for declarations.
• Online Access: Financial information, including import VAT statements and duty deferment account statements, is accessible online through the CDS customs financial accounts.
• Methods of Payment: CDS supports various payment methods, including Cash Accounts (automatically allocated to traders), Duty Deferment Accounts (requiring a new Direct Debit Instruction setup), and Immediate Payment.
• Standing Authorities: Businesses can grant standing authority to customs agents to use their duty deferment accounts through a self-service function in CDS.