Postponed Import VAT Accounting (PVA): What is it?
With effect from 1 January 2021 when the accounting practice known as PVA was first introduced, it became possible for UK VAT registered entities to account for, and recover import VAT incurred on the same VAT Returns to the extent that they can recover their input VAT. Where taxpayers choose to adopt PVA, the practise is voluntary, and they do not need to inform HMRC of their intention to do so.
The adoption of PVA means that taxpayers are no longer obliged to pay import VAT when acting as importer of record and their imported goods are to be cleared into free circulation at the border. In addition, taxpayers no longer need to wait until they have received the relevant C79 certificate from HMRC to be entitled to recover the import VAT incurred. Where taxpayers choose to adopt PVA for the importation of their goods, they start to benefit straight-away from the cashflow benefits it brings, since VAT is no longer payable at the border, and they no longer need to wait for receipt of a C79 certificate before recovering the import VAT incurred – use of the PVA eliminates delays in this respect.
Completing the VAT Return
In choosing to use the PVA, VAT-registered taxpayers must account for import VAT due on the VAT return for the period which covers the date that the imported goods were cleared into free circulation. For example, if a taxpayer submits VAT returns on calendar quarter basis, and it clears its imported goods into the UK on 2 May 2024, the taxpayer will need to account for import VAT due on the goods on its June 2024 VAT return.
The VAT return will need to be completed as follows:
- Box 1 – import VAT due for the period. Access to this information will be via the PVA statement or, if the taxpayer is unable to access its statements, it can estimate the import VAT figures.
- Box 4 – recovery of import VAT is subject to the normal rules, so if the taxpayer is a fully taxable business, the value of the import VAT included in box 4 will typically be equal to that in Box 1.
- Box 7 – the total net value of all goods imported into the UK in the accounting period (calculated as 5 times the import VAT incurred).
Monthly Postponed Import VAT Accounting Statement
VAT registered organisations will select that they will be using postponed accounting to declare their import VAT on the customs declaration. As the CHIEF system is no longer available to importers, organisations must select that they will be using postponed import VAT accounting as follows:
Declarations via Customs Declaration Service (CDS)
Enter your VAT registration number at header level in Data Element 3/40.
- Importers may also enter “role code” FR1 as the first component of the Data Element (please note, this is optional).
- On successful completion of the CDS import declaration, the customs declaration document will display Data Element 3/40 as follows: FR1 GBXXXXXXXXX
Following the correct completion of the customs declaration, a PVA statement will be generated, and it will show the total import VAT payable each month. Statements will generally be available to view in the first half of each month via the CDS. For example, a PVA statement should be available for download via CDS in the first half of July 2024 for imports of goods made in June 2024. It is important to note that CDS only provides six months’ worth of PVA statements. Although if required, older statements can be requested. It might be preferable for the taxpayers to download the statements each month and retain them within their own VAT records.
Estimating import VAT incurred on VAT Returns
If the taxpayer chooses to estimate the import VAT it incurred, the estimate should be as accurate as possible. As a starting point, the VAT value should be based on the amount paid for the goods, plus any other costs the taxpayer agreed to cover (this may include packaging, transportation, and/or insurance). It could also include any customs duties due but this is not required.
It is important to note that an estimate should only be used where the monthly PVA statement is not available.
Next steps
It would be important to notify your freight forwarder/shipping agent prior to their completing the customs declarations on your behalf, that you want to adopt the use of the PVA.
It’s possible that the freight forwarder/shipping agent might apply PVA automatically, but in that event, they would be obliged to notify you if that the case. You will need to provide them with your VAT and GB EORI numbers, to ensure they complete the customs documentation correctly and that HMRC is notified that you are the importer of record. It is this that will then generate the monthly PVA statement.
You will then need to ensure that the import VAT is captured correctly, including that you hold evidence supporting those amounts (i.e. a valid estimate, or the downloaded PVA statement), at the time your VAT return is completed.
If you would like to discuss any of the points mentioned above further, please get in touch with Thomas Mobee from our VAT team.
