Brexit has changed how EU member states interact with the UK. Please consult with your tax adviser on how Brexit has impacted your tax situation.
NoteAvalara AvaTax is a tax compliance solution that automates the complexities of calculating sales tax, VAT, and GST. Please ask your Customer Account Manager about Avalara AvaTax and how it can help with your VAT calculations.
VAT payment deferment
To support businesses during times of upheaval or economic hardship, tax authorities will often announce the deferral of VAT payments for a certain period of time. This can include:
- The payment of total tax liabilities can be delayed to a specific date or an optional installment plan can be implemented to allow for the gradual payment of VAT liabilities.
- This could be an automatic provision with no application or notification required, or an opt-in may be required for the payment deferment scheme.
Import and export VAT deferment
Importers of goods often have to fund import VAT taxes upfront and are then faced with delays and audits when trying to arrange repayment. Exporters are also burdened by heavy input VAT bills which require applications for refunds. Many tax authorities operate postponed accounting – removal of the VAT cash payment at the point of import – but only for businesses with a proven track record of VAT compliance.
VAT import deferment schemes within Europe
Many tax authorities offer VAT deferment schemes. The Netherlands import VAT scheme is a good example, as is the Belgian import VAT plan. The UK VAT deferment account enables importers to delay the payment of UK VAT for an average of 30 days.
Under EU VAT Directive rules, importers are required to provide some minimum guarantee for the deferment of import VAT and duties if they are not paid for at the time of importation.
UK VAT import deferment
If a non-resident company wishes to import goods into the UK, ordinarily it should register for UK VAT and pay the UK import VAT and other appropriate duties immediately on import. The UK offers an alternative, cash-flow friendly import VAT and duties deferment scheme. This enables the importer to defer VAT and duty payments to the month following the import. This usually requires a bank guarantee although there is a scheme in place to wave this for regular importers.
Import VAT and duty deferment with a guarantee
With the appropriate Deferment Account, any import VAT due only needs to be paid on the 15th of the month following the month of import. This enables importers to delay the payment by an average of 30 days.
Guarantee required for VAT and duty deferment
In the UK, guarantees must come from an approved bank, building society, or insurance company. They are supplied using form C1201. The guarantee must cover up to two months of the duties due.
Simplified import VAT accounting – no guarantee required
The VAT amount guaranteed under the Deferment Account can be eliminated altogether by applying for the SIVA (Simplified Import VAT Accounting) scheme. This was introduced in 2003, to cut the import VAT due via the Duty Deferment System. Importers can gain approval for SIVA at the same time as applying for their Deferment Account. This scheme is not available to new importers as HMRC requires at least three years of VAT compliance history.