What is Postponed VAT Accounting (PVA)?
Postponed VAT Accounting (PVA) enables businesses to account for import VAT on their VAT return rather than pay it upfront when goods reach the border. Businesses can defer import VAT payment until they file their next VAT return, thereby increasing cash flow and reducing administrative costs.
Who is Eligible for the PVA scheme?
PVA is available to all VAT-registered UK businesses that import goods for use in their operations.
Northern Ireland businesses remain part of the EU VAT area and do not have to pay import VAT on goods imported from the EU. The reverse charge will still apply.
Benefits of PVA for E-Commerce Sellers
The PVA scheme has several benefits for e-commerce sellers who import goods from outside the EU. Among the benefits are:
Improved Cash Flow
Businesses can improve their cash flow with the PVA scheme. Businesses can free up cash that would otherwise be tied up in VAT payments by deferring import VAT payments until their next VAT return is due. The method is particularly useful for e-commerce sellers who have tight cash flow constraints and sell high volumes of goods.
Reduced Administrative Burdens
E-commerce sellers can also benefit from the PVA scheme by reducing administrative burdens. Businesses can simplify their VAT reporting process by accounting for import VAT on their VAT returns rather than paying it upfront at the time of import. A VAT report can be prepared more quickly and with fewer errors if this is done.
Advantages in the market
The PVA scheme can also give e-commerce sellers a competitive edge over their competitors. It is possible for businesses to reduce their costs by deferring the payment of import VAT, and potentially offer lower prices to their customers. In addition to attracting new customers, this can also increase sales.
How Does PVA Work?
The PVA scheme allows businesses to defer import VAT payments until their next VAT return due date. The VAT due on domestic sales can be accounted for on the VAT return instead of being paid upfront when the goods are imported.
The import VAT that is deferred in the PVA scheme must be included in the VAT return of the business. Besides keeping records of imported goods such as their date of import, value, and import VAT, they must also keep records of import duties.
How to utilise the PVA scheme in the UK
PVA was implemented in the UK following the exit from the EU in January 2021. In the past, businesses importing goods from outside the EU were required to pay import VAT. VAT can still be paid at the border if you prefer, since the scheme is optional.
- In the United Kingdom, you can use PVA in the following ways:
- Ensure you are registered for the Customs Declaration Service (CDS)
- Include the following information on the customs declaration form:
- Your EORI number
- Your UK VAT registration number
- Put code ‘FR1’ in Box (3/40)
You can download a monthly schedule of imports if you use PVA instead of a C79 document. CDS enables you to import efficiently into the UK regardless of whether import VAT is paid at the border or PVA is chosen.
Our team of experts can assist you with the CDS registration process and can handle this process on your behalf if needed. We at UK-Accountant have a dedicated customs team that can assist with all your customs declarations needs, so you can focus on running your business.
Postponed VAT Accounting in France
In January 2022, France made Postponed VAT Accounting mandatory for all VAT registered businesses.
Postponed VAT Accounting in the Netherlands
Tradesmen can defer payment of import VAT at the border by obtaining an article 23 licence from the Dutch tax authorities. VAT payment is delayed until you file your VAT return with this permit. Article 23 licences require businesses to meet specific legal requirements and may require a deposit.
You cannot apply for an article 23 permit directly as a non-Dutch importer; instead, you must appoint a tax representative.
In addition, the fiscal representative is responsible for the following (where applicable):
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Completing and filing your VAT return within the time frame
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Completing the intra-community transaction declaration
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Ensuring the reverse charge mechanism is applied
Conclusion
Importing goods from outside the EU with the PVA scheme is a valuable tool for e-commerce sellers. The deferral of import VAT until the next VAT return is due allows businesses to improve cash flow, reduce administrative burdens, and gain a competitive edge. PVA could simplify your VAT reporting process and help you improve your bottom line if you’re an e-commerce seller who imports goods from outside the EU.
Frequently asked questions answered by HMRC:
Who can account for import VAT in their VAT return?
When can you account for import VAT?
When must you account for import VAT?
How to complete your import declaration to account for import VAT on your VAT return?