Postponed Accounting for VAT on Imports

A new system has been introduced from the 1st January 2021 where a business imports goods from outside the EU. This new system will apply to imports from the UK but also to imports from any other country outside the EU.

Prior to this new system, a business was obliged to pay the VAT on imports from outside of EU at the time they entered the country. This usually meant that the delivery agent would be required to pay the VAT to enable to goods to be allowed to leave the port. The business could reclaim this VAT when submitting their next VAT return. However, this created a potential cashflow problem as the business had to first pay over the VAT to Revenue and then reclaim this VAT through their VAT return.

Under the new postponed system, the payment of VAT is deferred until the business submits their periodic VAT return. This means that instead of paying over the VAT and then reclaiming it the business will instead account for the VAT and make a claim for this VAT in the same VAT return. For a business with full VAT recovery this will mean there will be no timing issue between paying the VAT and reclaiming the VAT.

The delivery agent should enter the relevant codes on the import declaration filed at the time the goods are imported. All business who were registered for VAT and Customs & Excise at the 31st December 2020 were automatically approved to use this new system. New businesses will also be automatically be considered for the scheme if they are registering a new VAT registration and are registered for Customs and Excise.

The VAT return (VAT3) and the VAT return of Trading Details forms have been updated to include additional fields to report goods imported through this postponed system.