As you know, from 1 January 2021, UK VAT registered businesses can account for VAT on imported goods in their VAT returns. This is termed postponed accounting and applies regardless of where in the world the goods have been imported from.
This change brings the cash flow benefit to traders of being able to declare and recover (subject to the normal rules) import VAT in the same VAT return. EC sales lists will no longer be required, which simplifies matters further.
There is no requirement to obtain permission to apply postponed VAT accounting. Except for businesses which submit an authorised simplified declaration before I January 2021, VAT registered businesses can apply postponed accounting from that date provided the imported goods are for use in their business and they have included their Economic Operators Registration and Identification (EORI) number on their customs declaration. VAT must be accounted for in the VAT return which includes the date on which the goods are imported.
Consequently, traders who are eligible to defer customs declarations will have to estimate their imported VAT from their own records and make any necessary adjustment when they receive the statement confirming actual import VAT due after submitting their deferred declaration.
The timing for declaring import VAT alters for businesses which import goods into special arrangements including customs warehousing and duty suspension. Import VAT is accounted for in the VAT return which covers the date on which the goods are released for use in the UK.
Janet is VAT registered and imported £50,000 of women’s clothing and £5,000 of children’s clothing on 31 January 2021. She will resell the goods in the UK. Janet will declare £10,000 (20% x £50,000) in Box 1 of her VAT return that includes January 2021, and claim the same amount as input tax in Box 4 because the goods are being used for a taxable business purpose. The net expense of £55,000 is included in Box 7. No VAT is payable on the children’s clothing because they are zero-rated.
It is important to be clear on three issues:
How Liquid will accommodate populating Box 1 & Box 4 for the VAT return for this
You will need to set up new VAT codes that go to each of the relevant boxes on the VAT return?
You will need to account for this by populating a journal, then create the appropriate VAT codes and set the VAT boxes to either Box1 or Box4 appropriately.
To setup new codes in Liquid go to VAT / Current VAT Rates / press the “Add New” button.
If you have any problems, please get in touch with support and they will assist you further.
The Liquid Team