Goods that move into the UK from the EU after 1 January 2021 will be considered imports, meaning import VAT and customs duties will be payable and customs declarations will need to be made.

Import VAT will no longer be payable when goods enter into the UK from 1 January 2021 and businesses will instead account for VAT on all goods imported using a postponed accounting system.

This means that import VAT will be accounted for and paid via the usual VAT return, which will lead to an improved cash flow position for many businesses.

This applies to all goods imported by VAT registered importers to the UK, including those from the EU.

In most cases, import VAT should be recoverable by businesses, but duty costs are irrecoverable.

Businesses will have to account for import VAT via their VAT return under the postponed accounting system if the goods they import are for use in their business.

The business must include its EORI number starting with ‘GB’ on its customs declaration and their VAT registration number if it is needed.

A business can then account for import VAT on its VAT return when they submit the declaration that releases those goods into free circulation from one of the following special customs procedures:

• customs warehousing
• inward processing
• temporary admission
• end use
• outward processing
• duty suspension.

A business can only account for import VAT on their VAT return once they release excise goods for use in the UK – also known as ‘released for home consumption’.

If the business imports goods that are not controlled into Great Britain from the EU between 1 January and 30 June 2021, they must also account for import VAT on their VAT return, even if they delay the customs declaration or use a simplified customs declaration to make a declaration in their records.

New rules for duty deferment will apply in Great Britain from 1 January 2021. These will allow businesses that import goods regularly, to apply for a duty deferment account to delay paying most customs charges, including customs duty, excise duty and import VAT.

Through this account, a business can make a single payment each month via direct debit instead of paying for each individual consignment separately.

The scheme is open to importers or customs agents and freight handlers that work for importers and have an approved deferment guarantee or waiver in place.

Regardless of the method of accounting for VAT on imported goods, checks to ensure that the data on the customs declarations is accurate will continue to be highly important for VAT purposes, for all imports.

This will be the primary means to ensure that the correct import VAT is accounted for and paid.

Imported goods in a consignment not exceeding a value of £135, excluding specific excise goods and gifts, will not be subject to import VAT at the border.

Low-value consignment relief will be withdrawn and VAT will be charged on the goods as if they were supplied in the UK and accounted to HM Revenue & Customs on the UK VAT return.

However, businesses selling goods to be imported into the UK with a value not exceeding £135 will be required to charge and collect any VAT due at the time of sale.

Businesses must determine the country where a supply takes place for VAT purposes so that they know where VAT due is payable.

At the moment the place of supply rules are applied almost identically across the EU Member States and it is expected that the UK will retain similar rights after the transition period ends to prevent disruption.

However, a consequence of this is that businesses may continue to create VAT liabilities in other EU Member States.

Further clarity on this is expected in future Government guidance and may be affected by the outcome of the ongoing trade deal negotiations.