From the beginning of next year, it will be possible for importers (or those who represent importers) to use a VAT and Duty deferral scheme in order to postpone their payments of VAT and Duty. The scheme also allows importers to pay the import VAT/Duty of all consignments that had their payments postponed at once, rather than individually by the means of direct debit. You must pay the duties and Import VAT you defer during one calendar month (the accounting period) as a total sum, either on the 15th of the next month or on the next working day after it if the 15th is not a working day. This means that you can defer duties and Import VAT for between 2 and 6 weeks – an average of 30 days credit.
Continue reading to find out how you can apply for the scheme, and what you need to do prior to applying.
How Does The Account Work?
As mentioned above, essentially the account allows you to defer certain payments when importing goods until the 15th of the following month. You must then pay the deferred charges by direct debit and in the form of pounds sterling. You can defer:
- customs duties
- Import VAT
- Excise duty VAT
- excise duties (including Tobacco Products Duty)
- levies imposed under the Common Agricultural Policy of the EU
- Positive Monetary Compensatory Amounts under the Common Agricultural Policy
- anti-dumping or countervailing duties imposed by the EU
- interest charges on customs debts
However, the account is not without limits. You will have a deferral limit on your account, and should you reach it, you will not be able to defer anymore payments. Late payments are also liable to be charged interest. If you make persistent late payments, the HMRC can also revoke your account.
You can change the limit on your account, but you must contact the HMRC to do so.
Can You Use It The Import VAT Deferral Scheme?
The short answer is yes. Anyone who imports regularly into the UK will be eligible to apply for the scheme. The scheme will then allow you to defer the payments of customs duty, excise duty and import VAT.
You may need a financial guarantee in order to create an account. This guarantee is called a Customs Comprehensive Guarantee and you can apply for one here.
However, if you already have the previous version of the deferral account (and you plan to keep using it) the HMRC should contact to discuss changing the account to fall in line with new rules and you will get a guarantee waiver. If you have not yet been contact but feel as though you should have been, click here.
SIVA – Simplified Import VAT Accounting
It is worth noting that you can also apply for a Simplified Import VAT Accounting account (SIVA) to help lower the guarantees required on your deferred payments. To get simplified accounting approval, your business needs to have a good system of control over its operations and flow of goods.
You’ll need to have records of your customs controls and a good history of VAT compliance over the last 3 years. You cannot apply if you owe money to the HMRC.
You will also need to have been registered for VAT for 3 years or more. You can still apply if you have been registered for less time, but you’ll go through more financial and credibility checks. Keep an eye on our social media as we will soon be releasing an article that focuses specifically on this topic.
These schemes could be vital for importers after Brexit when it comes to accounting for their import VAT, and thus it is well worth applying as soon as possible, as the deadline for Brexit is the 31st of December.
Here at J & P Accountants, we understand that the prospect of preparing your business for the application process and then contacting the HMRC can be daunting; but that’s where we come in.
If you are a business who participates in cross border e-commerce, we would be more than happy to help you register for the VAT deferral scheme, file your VAT returns, and help you comply with VAT in case your account faces any issues. At J&P, helping your business is our passion, and we understand that companies across the UK are at risk now more than ever. We are here to support you through the Coronavirus crisis and Brexit, so please do not hesitate to give us a call on 0161 637 1080 or send an e-mail to email@example.com.