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VT Transaction+

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Purchase of goods from the EU (to GB only)

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Introduction

From 1 January 2021, purchases of goods from EU suppliers are classed as imports, as is already the case for purchases of goods from non-EU suppliers.

The following applies to purchases of goods (not services) from the EU by VAT registered businesses in Great Britain (GB) - i.e. the United Kingdom excluding Northern Ireland - from 1 January 2021. For businesses trading in Northern Ireland please refer to Purchase of goods from the EU (to NI only).

The information on this page is for general guidance only and should not be taken as definitive VAT advice, since individual circumstances may vary. For details of your obligations for import VAT, please refer to HMRC guidance.

Option 1: Postponed VAT Accounting (PVA)

Option 2: Pay import VAT when goods enter the country

Option 1: Postponed VAT Accounting (PVA):

Most businesses have the option to postpone the payment of import VAT for imported goods (not only from the EU but also the rest of the world). 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.

This method can also be used for imports from non-EU countries.

To account for PVA in VT Transaction+:

1.Enter the purchase of goods in the usual way (i.e. using the PIN or PAY transaction), but do not enter any VAT. E.g. for a purchase of £100.00 worth of goods, enter £100.00 in the Total and Net fields, and leave the Input VAT field blank. Do not select the Purchases of goods from the EU option as this is for Northern Ireland businesses only.

2.You must account for postponed import VAT on the VAT return for the accounting period which covers the date you imported the goods. A monthly online statement from HMRC showing postponed VAT on imports from the previous month will be available to download, usually by the 6th working day of each month. This document should be used to account for import VAT.

3.Using information from the online monthly statement of postponed VAT, enter a journal (using the JRN function) to:

ocredit the VAT Output account with the import VAT due

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

For example, if your postponed VAT statement shows import VAT due of £20, you would enter the following:
Postponed VAT journal2

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

VAT return element

Included in VAT return

Amounts included £

Action required to populate VAT return

Output VAT due on imports

Box 1

20.00

Step 3.

Input VAT reclaimable on imports

Box 4

20.00

Step 3.

Net value of imports

Box 7

100.00

Step 1.

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 and PVA journal are in the period covered by the VAT return

you have entered the PVA journal correctly as described in Step 3. above

you have entered no VAT on the purchase transaction as described in Step 1, above

you have not changed the analysis account for the purchase transaction to be outside the scope of VAT

Boxes 2 and 9 will not be applicable for GB businesses as these relate to intra-EU acquisitions of goods (and purchases of goods by Northern Ireland businesses from the EU).

Option 2: Pay import VAT when goods enter the country:

HMRC state the following in their guidance document Paying VAT on imports from outside the UK to Great Britain and from outside the EU to Northern Ireland:

'Alternatively a business can choose to pay import VAT on importation. If you choose to do this, you can reclaim the VAT incurred on the imported goods you own as input tax subject to the normal rules. To claim input tax you will need the import VAT statement as evidence.'

The import VAT statement referred to, is the C79 certificate.

To account for payment of import VAT on importation in VT Transaction+:

1.Enter the purchase of goods in the usual way (i.e. using the PIN or PAY transaction), but do not enter any VAT. E.g. for a purchase of £100.00 worth of goods, enter £100.00 in the Total and Net fields, and leave the Input VAT field blank. Do not select the Purchases of goods from the EU option as this is for Northern Ireland businesses only.

2.Usually, the courier company delivering the goods, pays the import VAT to HMRC on your behalf, and then invoices you to pay the import VAT. To record this, enter a separate PAY/PIN transaction. This should be dated when you make the payment/receive the invoice. You will need to create a new account 'VAT - Import VAT' in the Creditors ledger, for the analysis account. The purpose of posting it here is so that it will not yet appear on the VAT return, as you cannot reclaim it until you have received the C79 certificate.

import_VAT_PIN

3.When you receive the C79, you can then reclaim the import VAT by moving the VAT from the VAT - Import VAT account to the VAT - Input VAT account with the following journal. Leave the Net field as 0.00. The journal should be dated when you receive the C79. The input VAT will then be picked up in Box 4. when you run the VAT return.

JRN_import

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

VAT return element

Included in VAT return

Amounts included £

Action required to populate VAT return

Input VAT reclaimable on imports

Box 4

20.00

Step 3.

Net value of imports

Box 7

100.00

Step 1.

The C79 is usually received in the month following the importation. This enables you to record the net value of the purchase in Box 7. (from Step 1.) and the input VAT reclaimable in Box 4. (from Step 3.) in the same VAT return.

However, if for any reason you have not received the C79 by the time you are due to submit the VAT return, you will need to adjust Box 7. to remove the net value of the purchase. This is because you will not be able to reclaim the import VAT in that return and therefore the net value of the related purchase cannot be included in that return. You can remove it from Box 7. by changing the purchase transaction to outside the scope of VAT, by right mouse clicking on it in an unsaved VAT return and choosing the Change Transaction To Outside The Scope Of VAT option from the pop-up menu.