If your business is VAT registered and imports goods or services into the UK, you could benefit from postponed VAT accounting. In this article, we’ll look at what post VAT accounting means, how it works, and the advantages for you.
What Is Post VAT Accounting?
Postponed VAT allows businesses to defer the payment of VAT on their imports, so instead of paying VAT at source when goods enter the UK, you can declare and pay the import VAT on your next VAT return. The scheme reduces the immediate financial impact of importing goods and can simplify cash flow management.
How It Works
When you import goods into the UK, you’ll need to declare the import VAT amount on your VAT return, instead of paying it immediately at border control. If eligible, you can then recover the declared import VAT on the same VAT return, which means that in some cases there is no need for an actual payment, as the output VAT and input VAT offset each other.
Is Postponed VAT Right For My Business?
If your company imports goods on a regular basis, or in high volumes, postponed VAT lets you avoid upfront VAT payments, which can make a big difference to your cash flow. There are also potential administrative benefits, simplifying your VAT return process by consolidating the declaration and recovery of import VAT into a single step. If you have the accounting and administrative resources in-house to handle the necessary adjustments to VAT reporting, it can improve your operational efficiency. Working with an outsourced accounting partner, such as Vanilla Accounting, will further reduce your administrative burden.
The businesses that stand to benefit most from postponed VAT are large businesses with high-volume imports, and businesses that frequently import goods from outside the EU.
Is My Business Eligible For Postponed VAT?
In terms of eligibility, you must be UK VAT registered to claim postponed VAT. To make a claim on imported goods, the same VAT rules apply for domestic purchases. Some imported goods and services are VAT exempt. For example, medical equipment, healthcare supplies, and many educational and training materials are VAT exempt in the UK, and the same applies to imports.
Most modern cloud accounting platforms, such as Xero, are already set up to handle postponed VAT accounting, and will auto update to accommodate any future changes in VAT regulations so you remain compliant.
Find Out More About Postponed VAT Accounting
If you’re interested in finding out more about postponed VAT and the benefits for your company, get in touch with Vanilla Accounting today, and we can talk through the potential impact on your financial management and cash flow.
