Import VAT is the VAT charged when goods come into the UK from abroad. Postponed VAT accounting, or PVA, lets a VAT registered business account for that import VAT on its VAT return instead of paying it at the border. This keeps cash in the business.
What import VAT is
When you bring goods into the UK, VAT is usually due on them, much like VAT on a UK sale. The rate is normally the standard 20%, worked out on the value of the goods plus some costs such as shipping and duty.
The old way and the cash flow problem
Before PVA, a business paid import VAT at the border, then reclaimed it later on a VAT return. That could tie up a lot of cash for weeks, for no lasting cost, since the VAT came back in the end.
How postponed VAT accounting helps
PVA removes that wait. Instead of paying import VAT at the border, you record it on your next VAT return. You enter the VAT as due and reclaim the same amount on the same return. For most businesses the two cancel out, so the cash effect is zero.
[ Infographic: Postponed VAT accounting ]
Brief: compare paying import VAT at the border and waiting, against recording it on the VAT return where it nets to zero.
Alt text: Postponed VAT accounting records import VAT on the return instead of paying it at the border.
Caption: PVA turns import VAT into a cash neutral entry on your return.
How to use PVA
- Tell your shipper or freight agent that you want to use postponed VAT accounting.
- Make sure your import declaration shows this choice.
- Download your monthly postponed import VAT statement from HMRC.
- Use the figures from that statement to fill in your VAT return.
One point to watch. Some freight agents default to paying the VAT at the border unless you tell them to use PVA. Always confirm this before the goods ship.
Who can use PVA
Any VAT registered business that imports goods for its business can use postponed VAT accounting. You do not need to apply. You choose it on each import declaration.
Frequently asked questions
What is import VAT? VAT charged on goods brought into the UK from abroad, usually at the standard 20% rate on the value of the goods plus some costs.
What is postponed VAT accounting? A way to account for import VAT on your VAT return instead of paying it at the border, which keeps cash in the business.
Do I have to apply for PVA? No. You choose it on each import declaration. Make sure your shipper knows you want to use it.
Is postponed VAT accounting cash neutral? For most businesses, yes. You record the VAT as due and reclaim the same amount on the same return.
Where do I get the figures for my return? From your monthly postponed import VAT statement, which you download from HMRC.