From 1st January 2021, UK VAT registered businesses are able to account for VAT on imported goods on their VAT return using the postponed VAT accounting system.
Under PVA, instead of paying import taxes immediately and then reclaiming later in a subsequent VAT return, the VAT is accounted for as both input and output VAT on the same return.
This is very similar to the reverse charge mechanism used for EU trade before Brexit.
Note: Postponed VAT accounting can only be used with accounts running the standard VAT scheme.
How to account for postponed VAT
There are multiple different ways to account for postponed VAT, depending on when you receive the relevant documents:
1. Receiving an invoice from your vendor
This method is appropriate to use when there's going to be a long delay between receiving the invoice for the goods and the monthly statement from HMRC. With this method, you'll use a special tax code in Brightpearl to estimate the VAT due on the goods.
See more about the tax codes below.
2. Use the monthly statement from HMRC
With this method, you won't estimate the VAT on your invoices, and instead record the VAT when you get your monthly statement from HMRC.
You may want to use this method if you receive your statement and your invoice in the same period.
3. Receiving an invoice from your import agent
With this method, you won't estimate the VAT on your invoices, and instead record the VAT when you get your invoice from your import agent.
You may want to use this method if your import agent can give you an accurate value for postponed VAT.
When using the second and third methods (and when correcting estimates), you would post a new journal under Accounting > Enter a journal:
|2200 Sales Tax Control Account||X||PV2|
|2201 Purchase Tax Control Account||X||PV2|
You can also use the PV0 tax code, or another tax code set up specifically for this purpose.
PVA tax codes
Two tax codes are available to use to estimate the VAT on invoices.
In VAT mode Brightpearl accounts, you can view these codes at Settings > Tax > Tax codes.
|Tax code||Rate||Reporting rate||Purpose|
|PV2||0%||20%||Reporting PVA expenses at the standard rate|
|PV0||0%||0%||Reporting PVA expenses at zero rate|
These tax codes each have a rate of 0% which applies to the items on an invoice, bill or credit, but a separate reporting rate which is used by the VAT return.
The VAT return
When entering a supplier bill/credit or a purchase invoice/credit using one of these codes, no tax is added to the transaction.
However, the VAT return will account for the reporting rate in boxes 1 and 4. The net amount will be reported in box 7.
|Box 1||Includes the VAT due in this period on imports accounted for through postponed VAT accounting|
|Box 4||Includes the VAT reclaimed in this period on imports accounted for through postponed VAT accounting|
|Box 7||Includes the total value of all imports of goods in this period, not including any VAT|
Note: You should never have any transactions posting to the 2200 Sales tax control account or the 2201 Purchase tax control account using the PV2 or PV0 codes, unless they have been manually entered for the purpose of making corrections to the amount being reported.