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UK Legislates For Postponed Import VAT Accounting

Tuesday, February 5, 2019

The UK Government has published, and tabled before the House of Commons, The Value Added Tax (Accounting Procedures for Import VAT for VAT Registered Persons and Amendment) (EU Exit) Regulations 2019.

The Regulations set out import VAT rules where a taxable person imports goods after the UK leaves the European Union.

If there is a "no-deal" Brexit, imports from the EU will be treated in the same way as non-EU imports presently – that is, import VAT will be due on all imported goods.

To ease the cash flow burden on businesses, the Government has committed to offering postponed accounting for import VAT on goods brought into the UK, from either the EU and outside the EU. This means that UK VAT-registered businesses importing goods to the UK will be able to account for import VAT on their VAT return, rather than paying import VAT on or soon after the time that the goods arrive at the UK border. Those businesses covered by the Regulations would have until the 15th day of the month to make said declaration.

Specifically, Regulation 3 provides that a person registered for VAT and liable to pay import VAT on relevant imported goods may have any such goods delivered or removed without payment of import VAT where that person accounts for the import VAT under the Regulations.

This regulation also modifies the application of Section 16(2) of the Value Added Tax Act 1994 ("VATA") (which provides for import VAT on the importation of goods to be charged and payable as if it were import duty within Part 1 of TCTA 2018).

Regulation 4 provides that a person registered for VAT and choosing to account for import VAT under these Regulations may do so on the return that person is required to make for a prescribed accounting period provided that the conditions in Regulation 5 are met.

Regulation 5 sets out the conditions to be met for the application of regulation 4. Notably, a registered person's value added tax registration number must be shown on a declaration for the free circulation procedure that that person makes on the importation of goods in accordance with Part 1 of TCTA 2018. Where relevant goods are declared for a special customs procedure, the registered person must comply with requirements imposed by or under that Part.

Regulation 6 provides that a person to whom the Regulations apply is required to account for import VAT on the person's return for a prescribed accounting period if the person has not otherwise accounted for it by the due date for furnishing that return, and is presumed to be so required for the purposes of VATA.

Finally, Regulation 9 allows HM Revenue and Customs to direct that a person registered for VAT may not account for and pay import VAT under the Regulations if they consider it necessary to do so for the protection of the revenue. Such a direction must be notified in writing and takes effect from a day not earlier than the date of the direction. Regulation 10 and 11 provide for a right to appeal such a decision before a tribunal.