postponed vat accounting

Postponed VAT Accounting (PVA): What Do You Need To Know About Its Working?

Postponed VAT accounting is a valuable process that the HMRC introduced in early 2021. In simple words, it lets you postpone VAT. Using this system, you can avoid paying the VAT upfront and easily manage your payments. You can avail of this service if you are registered for VAT. Instead of paying VAT upfront, you account for import VAT on your VAT return.

Does PVA feel familiar somehow? It might be because it is similar to another popular process known as reverse charge mechanism. Simply put, the reverse charge mechanism allows you to declare both output and input VAT simultaneously, and postponed VAT accounting VAT return follows a similar pattern.

If you want to know more details and how you can register for postponed VAT accounting, continue with the following detailed blog.

Introduction To Postponed VAT Accounting?

Postponed VAT Accounting is a unique process that enables you to account for import VAT on your VAT return rather than paying VAT when the goods arrive. Let us understand this with a postponed VAT accounting example.

Let's say there is a company named A. Company A decides to import goods, and the total amount exceeds GBP 135. Some VAT would apply to the imported goods, which the company would have to pay. Later on, VAT could be recovered from the HMRC.

But if the company was registered for Postponed VAT accounting, company A can account for VAT on their VAT return instead of paying the VAT upfront. Although both ways look the same, the latter one is more productive. It makes things look simple and saves you a lot of time.

When Should I Consider Registering My Business For Postponed VAT Accounting?

Any business that imports goods from the United Kingdom can benefit from PVA. It helps the business manage its cash flow and reduce its financial load. Some businesses might benefit more from postponed VAT accounting compared to others. These include the following:

  • Businesses that have a short time gap between importing goods and selling them.
  • Businesses that import with a very high VAT rate, like the standard VAT rate.
  • When the liability of VAT is very low, and the business has a VAT repayment position.
  • When the goods are imported on a very large and massive scale.

These businesses benefit a lot from postponed VAT accounting. However, a business that imports goods at a zero or reduced VAT rate or imports goods on a very small scale will benefit less than the business mentioned above would.

How To Get Your Postponed VAT Statement?

postponed vat statement

HMRC offers a very easy method to get your postponed VAT accounting statement. You will have to access the customs declaration service and be issued an online import VAT statement. Each of your statements will reveal the total import VAT postponed for the previous months. Usually, all the statements can be viewed on the eighth working day of the month.

The statements would be accessible to download for a maximum of 6 months, the date after publication. Statements which are older than this time interval are usually archived. If you have never accessed the Customs Declaration Service before, you must subscribe to the Customs Declaration Service. There, they would ask for minute details about your business.

If you're new to this process and wondering about the financial implications, it's essential to understand how to calculate import duty accurately. Familiarize yourself with the complexity by learning how to calculate import duty before exploring Postponed VAT Accounting.

What If I Cannot Access My Statements?

If you cannot access your statements for one reason, HMRC advises you to estimate your import VAT figures. It would help if you tried to make the estimate as accurate as you can. It should be based on all the amount that has been spent for all the things that you have mentioned to cover. These may include packaging, customs duties on your goods, insurance and transport costs.

You can also contact the import and export helpline and notify them about your problems with your PVA statements. They will immediately determine your problem and help you track your statements.

What Do I Need To Do If I Am A Member Of A VAT Group?

If You Are a member of a VAT group, you can also easily access your statements. Being a member of a VAT group means that you would have been issued your own EORI number, which can be used to get your statements easily.

After you have received your statements, you should send them to the representative group member. This is necessary as they would need all the statements to complete the VAT return process for the whole group.

How To Get Started?

You will need your Government Gateway user ID and password to get started. You must note that you can not use an intermediary or an agent Government Gateway user account and must create your own. If you do not have an ID yet and want to get one immediately, and get your statement as soon as possible.

After you have subscribed, it usually takes only 2 hours. However, it might take up to 5 working days if the HMRC needs to get some more checks. Once you have subscribed, you will be able to access the following services:

  • Using a cash account for Customs Declaration Service declarations
  • Getting your postponed VAT accounting statements
  • Getting your import VAT and Duty adjustment statements
  • Able to check how to pay duties and VAT on imports
  • Able to set up a direct debit for a duty deferment account
  • Uploading documents and getting messages about customs declarations
  • Managing your email address for the Customs Declaration Service

Adding A Team Member

If you want to add some other people connected with your business to use your subscription, you can add him as a team member. This would enable the person to access all the services that were available to you. Team members can be added directly from your business tax account.

You are given full authority over which services each team member would be able to access. It should be noted that all the group members must send their statements to the representative group member, as he would need to compile all the statements to complete the VAT return process for the entire group.

Postponed Accounting And Northern Ireland

Businesses operating in Northern Ireland are still considered a part of Ireland. So, goods arriving in Ireland from the EU will not be considered imports. This means that they will not incur import VAT. However, businesses in Ireland can still avail of postponed VAT accounting services for imports from non-EU countries.

Apart from these, it would help if you kept in mind that Northern Ireland has unique VAT and customs regulations, which should not be confused with the European Union regulations. Under the current rules and regulations, trade of goods between Northern Ireland and the UK is not considered international trade, and these would be taken as domestic sales. Hence, these will not incur any VAT.

One more thing should be kept in mind about postponed VAT accounting in Ireland. The business must register for PVA when goods are imported into Ireland from outside the EU and with a value below £135.

Limitations When Registering For Postponed VAT Accounting

As with all the other processes, PVA has some limitations that should be remembered. First of all, as already mentioned, PVA can not be used for goods imported from the European Union into Northern Ireland. The reason is that Northern Ireland is still considered a part of the EU VAT system.

Secondly, the PVA system does not apply to goods that are imported for purposes other than business. These make your business ineligible to obtain benefits from the PVA system. Explore the pros and cons of being VAT registered to make an informed choice for your business.

When To Hire A Tax Advisor?

If you are in a dilemma about whether registering for the PVA is the right choice for your business, you should consider taking professional advice. You can also hire a tax advisor for this specific purpose.

If you are running a very small-scale business, then it would be wise to research it yourself, but if your business operates on a massive scale, just a small investment on your front could mean a huge profit for your business.

How To Keep Track Of Your Postponed VAT?

You can hire a VAT professional or use some accounting software such as Debitoor to keep track of your postponed VAT. This software assists you in keeping records of all your business finances and notifying you at the proper time. You can connect your account directly to the HMRC and schedule your VAT return.

Many of these software, including Debitoor, offer a 7-day free trial. Hence, you can test whether these are a good option for you. Otherwise, you can get assistance from a professional taxation advisor.

Final Verdict

Postponed VAT accounting is a process similar to the reverse charge mechanism. It reduces the financial stress load from a business by avoiding the need to pay VAT upfront. It helps businesses to manage the flow of cash with ease.

This process especially holds great importance for businesses operating on a large scale and when the gap between importing and selling goods is very small. There are no cons when registering your business for VAT, so unless you are certain that you do not need to benefit from this facility, you should consider subscribing.

Many businesses in Ireland and the UK still need to be made aware of this process, which is still a fresh administrative requirement. If you are still in doubt or cannot make any decision, you should consider subscribing or contacting a tax advisor. By taking this step wisely, you can excel greatly and help your business grow faster than ever.

Rían Doyle

I'm a VAT professional with years of experience helping businesses with compliance and reporting. My goal is to simplify VAT calculation and provide valuable insights through my engaging writing style and clear explanations of complex concepts.