From Acquisition to Import VAT – How Will Businesses Be Affected Post-Brexit?

February 2018

With the passing of the cross-border bill for a second reading, there has been a lot of focus in the press along with an acknowledgement from the Financial Secretary to the Treasury, Mel Stride, confirming that the Bill “moves us away from acquisition VAT to import VAT”.

So what is the difference between Acquisition and Import VAT and what impact will this have on your business?

The key differences between Acquisition and Import VAT

In simple terms, Acquisition VAT is currently accounted for where there is an intra-EU movement of goods.  Typically, this will be a supply of goods from one VAT registered business located in one Member State to a UK VAT registered business here in the UK.

On the other hand, Import VAT is currently accounted for on the import of goods from locations and businesses outside the EU.

Come 29th March 2019 when the UK leaves the EU, it is feasible that for all transactions currently treated as acquisitions from the EU27 countries, businesses will be liable to pay Import VAT.

The key difference is that Import VAT is physically payable (along with the relevant customs duties) at the UK frontier, meaning that any goods coming into the UK will not be released from the point of entry without payment being made. This is in contrast to acquisition VAT which is recorded on the relevant VAT return and, for most businesses, is a VAT-neutral entry.  This change to import VAT does create a significant cashflow deficit until it can be recovered.

How Customs Connect can help

Customs Connect can review and optimise these processes and help you to minimise this impact with our tailor-made VAT Solutions – our Director of VAT, Gavin Tucker, can assist with any concerns you may have (gavin.tucker@customsconnect.co.uk, mobile: +44 (0) 7966 250866).

A few simple things can be done to help mitigate potential deficits for UK businesses importing goods, these include:

  • Consideration of timing of imports – for significant one-off expenditure, businesses may coincide their imports with VAT return reporting to minimise the cash flow impact.
  • Duty deferment scheme – Applying to HMRC for a duty deferment account (which also covers import VAT payments) offers businesses several benefits including quicker entry clearance for goods and the ability to delay the payment of duty and import VAT.
  • Simplified Import VAT Accounting (“SIVA”) – this works in conjunction with the duty deferment scheme and, subject to a number of conditions, the value of the import VAT can be ignored with regard to the financial guarantee required by HMRC, thus reducing the financial cost of operating the duty deferment account.

At Customs Connect, we can assess mitigation options and providing assistance with the implementation in time for the advent of Brexit, not only with our VAT services but also with our Brexit Modelling tool. For more information, give Gavin a call on +44 (0) 7966 250866, or email gavin.tucker@customsconnect.co.uk.

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