Postponed Accounting For Businesses Post-Brexit
What Is Postponed Accounting?
Following on from the Brexit deal, the current law regarding VAT on imported goods is going to be changing from January 2021. However, postponed accounting has been reintroduced to help businesses with this change. Postponed accounting post-Brexit will mean that any VAT registered business will not have to pay VAT on imported goods into the UK.
It allows the business to postpone the VAT payment and instead, it will be declared in Box 1 and Box 4 of the next VAT return that the business submits. The net payment for the imported goods will be included in Box 7.
Boosting Cash Flow For Businesses
Originally, postponed accounting was abolished back in 1984 which benefited the government as they received a cash flow boost of £1 billion as there was a delay in paying VAT on imported goods into the UK and claiming input tax.
However, postponed accounting being introduced in January next year is actually going to have the opposite effect on the government, meaning they will receive a negative cash flow. This is because those importing that aren’t VAT registered will still pay VAT once the goods have arrived in the UK.
Trading With EU Countries
HMRC has announced that trading goods with EU countries from the UK will now be the same as if you were trading with a non-EU country. There will no longer be the label, ‘dispatches’ for output into the EU and the label, ‘arrivals’ for goods being imported into the UK.
Now, you might think that this means the remaining Boxes, 2, 8 and 9 of VAT returns can be removed from January 2021 as they only relate to EU imports and exports, but this isn’t strictly true. These three boxes might not be relevant for businesses in Great Britain, but they will still apply to businesses in Northern Ireland who are still making dispatches with the EU as part of the Northern Ireland Protocol.
The Issues Arising From Postponed Accounting
It is said that postponed accounting will apply to all imported goods from 1st January 2021 which includes both EU and non-EU imports. Customs declarations of non-controlled goods being imported can be deferred by 6 months (until 1st July 2020). However, entries for postponed accounting goods must be relevant to the date of import.
When submitting Box 4 on your VAT return, the VAT returns must undergo the same input tax tests as when a UK supplier submits a purchase invoice. This Box 4 claim will be backed up by the use of the C79 documents issued by HMRC.
Expert Advice On Postponed Accounting
If you are looking where you can find more information on not just postponed accounting, but all things accounting for your business, our experts at Stonehouse Accountants can help. If you would like to speak to one of our team members who can offer you expert advice, feel free to contact us here or call us today on 01733 265888.