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The transition period for the UK leaving the EU ended on 31 December 2020. This has not only resulted in changes to duties and taxes on imports and exports but has brought about significant changes to the practical considerations that businesses have had to understand and forced decisions to be taken on supply chains due to new constraints on the import and export process having been introduced.

Understanding the implications of some of the fundamental practical supply chain considerations for imports such as whether to opt for delayed declaration or full entries and Postponed VAT Accounting (PVA) can help make the import process smoother.

For exports it is essential to understand the terms upon which you are making the supply (Incoterms) and what this means for your business.

So what has changed? 

Previously when goods were imported from a non-EU country the payment of any Custom duty and Import VAT was either due immediately or a duty deferment account could be set up, so that any payment was instead made on the 15th of the following month. Generally no duties or VAT applied on goods coming from the EU.

Since 1st January 2021 the non-EU principle applies to goods imported from the EU. However, as a simplification registered importers became able to account for VAT on goods imported for use in their VAT registered business on their next VAT return; rather than making payment at the UK border and reclaiming it on their next VAT return after being issued with an HMRC form C79. This simplification is referred to as PVA and now applies to imports from anywhere outside of the UK not just those from the EU.

The voluntary election to use PVA is made on the Customs declaration alongside the VAT Registration Number or EORI.  It is also possible for importers to use PVA for some imports and existing methods for others as long as it has been indicated on the Importer’s Customs paperwork.

PVA enables Importers to account for and recover import VAT on the same VAT return (similar to the old reverse charge mechanism with EU imports) thereby helping cash flow.

Once the election has been made the Customs declaration system will generate an online monthly postponed import VAT statement that will serve as the evidence to account for and recover the import VAT on the next return. It is important for those responsible for VAT to retain these statements as evidence of the VAT treatment followed.

End of transitional period

Between 1 January 2021 to 30 June 2021 there was a further transitional approach for importers. 

Importers who deferred their Supplementary Customs declaration were allowed to estimate the amount of import VAT due for the month of import and applying that estimate to the quarterly or monthly VAT return.

When the deferred declaration was finally submitted the actual amounts were compared to the original estimate and adjustments made on the next VAT return.

Now that we are at the end of the transitional period all of the practical considerations need to be reviewed again, if you have not already done so.

Please join us for a webinar on Thursday 12 August 2021, where we will be joined by David Miller from the The Customs People, as we discuss the practical issues affecting both Importers and Exporters and look in more detail at the points noted above. Book your place here.