You will observe some changes after December 31st. Britain leaving the EU will bring some big-time changes. One of the biggest changes you may observe is the VAT changes which the government is adjusting by introducing a postponed vat accounting scheme.
What is postponed VAT accounting?
After the Brexit, the goods coming from the EU countries will be classified as imports. That means that VAT will be applicable after it will arrive in the UK. Right now, VAT is payable on imports coming anywhere in the world except the EU. VAT is applicable to the imported goods over £135.
The UK government has devised a New VAT accounting system to mitigate the effect of additional VAT on businesses to control the negative cash flow impact. Under this scheme, businesses will avoid the seizure of their goods at customs.
How does postponed VAT accounting work?
The facility under the PVA scheme is optional. You can pay VAT on your goods upfront if you wish to. Also, the payment can be made when goods are circulated; for example, at the port of entry or after customs’ release.
You will have to get C79 reports from HMRC, the same as the imports from non-EU countries. The PVA is mandatory if you defer the customs declarations.
Who can use postponed vat accounting?
All registered businesses in the UK can use this facility. But the businesses in Northern Ireland will continue to be considered as part of the EU. So, the goods coming from the EU will not be considered imports for Northern Ireland. But they can use PVA for non-EU imports.
How does the PVA process work?
The processes will change after Brexit. This means some boxes that you fill might be out of date.
Some change confirmed by HMRC include:
For VAT due on sales and other outputs – Fill this box with the information about VAT that we due during this period on imports accounted for through PVA.
Reclaimed VAT on purchases and other inputs – You have to put reclaimed VAT details during this period on imports accounted for through PVA.
The total value of purchases and all other inputs excluding any VAT – Fill it with the total worth of all your imported goods. You also have to include your online monthly statement without VAT.
What if I don’t use PVA?
If you want to pay VAT immediately on imported goods when they get in circulation, you only have to fill boxes sever and four.
Online monthly statements play a vital role in managing PVA. The new report will only show the import VAT postponed during the time period of the previous month.
This PVA report is extremely important for your VAT accounting records. Just download and store the copies for the records.