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Import VAT - Option 1: Postponed VAT Accounting (PVA)

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The following information is for general guidance only and should not be taken as definitive VAT advice, since individual circumstances may vary. To determine the VAT treatment for your particular transactions please refer to HMRC guidance or seek tax advice from an accountant.

Introduction

Where import VAT is due on goods purchased from abroad, most businesses have the option to postpone payment of the import VAT. This is known as Postponed VAT Accounting (PVA), which allows a business to account for import VAT and pay it through the VAT return, rather than paying import VAT when goods enter the country.

To account for postponed VAT in VT Transaction+:

(Note: if you are on the cash accounting VAT scheme, refer to the instructions here instead.)

1.Enter the purchase of goods in the usual way (i.e. using the PIN or PAY transaction), but do not enter any VAT. Select Normal in the Type of Purchase (for VAT purposes) section. For example, for a purchase of £100.00 worth of goods:

PVA invoice

A purchase invoice for imported goods from a supplier

2.Enter a journal for postponed import VAT using the information from your monthly postponed import VAT statement from HMRC:

ocredit the VAT Output account with the postponed import VAT due

odebit the VAT Input account with the same amount (assuming you can fully reclaim input VAT)

For example, if your postponed import VAT statement shows an entry for import VAT postponed of £20.00, you would enter the following (and so on for each entry):
Postponed VAT journal2

 A journal of a postponed import VAT entry

The entry details field can be used to enter information to trace the entries to the relevant supporting documentation, e.g. PIN/PAY number of the related purchase of goods, and Movement Reference Number (MRN) of the import VAT transaction on the postponed import VAT statement.

Completing your VAT return

When the VAT return is run, the appropriate boxes will be populated with the required values from the example above, as follows:

VAT return element

Included in VAT return

Amounts included £

Output VAT due on imports

Box 1

20.00

Input VAT reclaimable on imports

Box 4

20.00

Net value of imports

Box 7

100.00

If these do not appear correctly when running the VAT return, check that the following actions have been done:

the dates of both the purchase transaction in step 1. and postponed VAT journal in step 2. are in the same period covered by the VAT return

you have entered the postponed VAT journal correctly as described in step 2. above

you have entered no VAT on the purchase transaction as described in step 1. above

the analysis account for the purchase transaction is within the scope of VAT (by default, expense and cost of sales accounts are set to being within the scope of VAT) - you can check this by following the instructions in Transactions outside the scope of VAT

Other points

You must account for postponed import VAT in the VAT return which covers the date you imported the goods

The postponed import VAT statement is usually available by the 6th working day of each month. HMRC states here that an estimate should be made if you’ve delayed your import declaration and do not have a statement.

If you have set up VAT cash accounting in VT Transaction+

According to HMRC guidance, 'you cannot use the VAT Cash Accounting Scheme for goods you import'.

To account for PVA on imports under the standard method for VAT while maintaining cash accounting for your other transactions, carry out steps 1. to 4. above, but with the following differences:

Step 1: Ensure the analysis account used to record the purchase is set to being outside the scope of VAT - to change this, please refer to Transactions outside the scope of VAT

Step 3: On the entry to the VAT - Input account, enter the net value of the purchase in the Net column, as a positive amount.

The boxes in the VAT return will then be populated with the same figures shown in Step 4 above.