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VT Transaction+

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Purchases of goods from outside the UK

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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 on purchases of goods from abroad, please refer to HMRC guidance.

Introduction

Purchases of goods by businesses in Great Britain (the United Kingdom excluding Northern Ireland) from suppliers outside of the United Kingdom are classed as imports.

Purchases of goods by businesses in Northern Ireland from suppliers in non-EU countries (except the United Kingdom) are also classed as imports.

Purchases of goods by businesses in Northern Ireland from suppliers in EU countries are classed as acquisitions and are treated the same way as intra-EU purchases of goods - see Purchases of goods from the EU to Northern Ireland))

Purchases of goods between Great Britain and Northern Ireland are classed as domestic purchases for UK VAT - see Purchases of goods between Great Britain and Northern Ireland))

Import VAT is due on imports and can be accounted for under 2 options:

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

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

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

Most businesses have the option to postpone the payment of import VAT for imported goods. 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 PVA in VT Transaction+:

(NB: if you are on the cash accounting VAT scheme, please also follow these steps, except for a couple of differences in steps 1. and 3. which are noted here)

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.

2.You must account for postponed import VAT in the VAT return which covers the date you imported the goods. A monthly online statement from HMRC showing postponed VAT on imports from the previous month can be downloaded, 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

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)

NB: If you are on cash accounting

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

In order to exclude import transactions from the cash accounting process, and to account for them using PVA, you should carry out steps 1. to 4. above, but with the following differences:

Step 1: Ensure the analysis account used to record the purchase is not set to being within 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.

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

Import VAT - 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+:

(NB: if you are on the cash accounting VAT scheme, please also follow these steps, but with a couple of differences to steps 1. and 3. which are noted here)

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.

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 included 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.

NB: If you are on cash accounting

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

In order to exclude import transactions from the cash accounting process, and to account for import VAT paid, you will need to carry out steps 1. to 4. above, but with the following differences:

Step 1: Ensure the analysis account used to record the purchase is not set to being within 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.

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