Postponed Import VAT Accounting – HMRC takes a hardline on documentary requirements
Andrew Thurston · Posted on: July 8th 2024 · read
A new issue regarding Postponed Import VAT Accounting (PVA) has arisen, which may cause concern for importers using PVA or Customs Agents acting on behalf of overseas businesses.
MHA have recently been made aware of HMRC’s policy on the application of PVA when importing goods into the UK. Due to the obvious cash flow benefits that PVA provides, it is now commonplace for UK importers to use this method of accounting for import VAT.
Until now, MHA has not had any reason to have concerns that PVA may create a tax liability as part of a Customs Audit. Previously, any import VAT debt would be added to the latest VAT Return which would not have any major detrimental effect on the importer.
This situation has changed with the recent awareness of HMRC’s policy on the application of PVA at the time of import. HMRC has disallowed the use of PVA on imports where a customs debt was identified, as there was no evidence that the importer provided a written instruction to use PVA on its behalf.
Since Brexit, the customs broker sector has constantly upgraded its processes to manage the PVA process, with many now asking for confirmation via the Direct Representation form. There is currently no evidence to suggest that this is not acceptable as a form of instruction evidence.
Issues may arise where the importer or customs agent does not hold any evidence that a written instruction has been made by the importer for use of PVA. Where this arises, HMRC have disallowed the use of PVA if a customs debt is identified resulting in an assessment for the customs duty and the import VAT.
Due to the obvious cash flow benefits that PVA provides, it is now commonplace for UK importers to use this method of accounting for import VAT.
For UK businesses, deemed to be UK-established for customs purposes, this will create a cash flow issue at best, with HMRC allowing a time to pay arrangement in most cases.
However, for non-established businesses, there is a significant risk to the UK Customs Agent as they will be acting as an Indirect Agent.
Where a VAT debt is raised to the UK Indirect Agent, it will not be in a position to reclaim the VAT as it is not the owner of the goods. MHA is concerned that many UK customs agents may not have the required evidence and any customs debts raised against their overseas clients could render them subject to unreclaimable import VAT.
This situation highlights the importance of each party understanding the obligations of using PVA and the evidence required.
UK customs agents may not have the required evidence and any customs debts raised against their overseas clients could render them subject to unreclaimable import VAT.
For further information
For more detailed guidance and support, please contact our Customs Team.
