BREXIT: VAT deferment on imports after January 1st 2021

From January 1, 2021 all goods shipped from the EU will be taxed with import VAT and there is a risk that British entrepreneurs would see this as a large claim on their working capital.

At present, these goods are still acquired intra-Community. The VAT reverse charge mechanism applies to this, so in general no VAT has to be paid. Until now, the UK has not had a VAT deferment mechanism for imports.

However, such a deferment will be in place from 1 January 2021. This means that in most cases the VAT does not have to be paid on import. From 1 January 2021, entrepreneurs can declare VAT on import on their VAT return by means of VAT deferment.

When VAT deferment is applied on import, the following applies:

• The imported goods are intended for use in the business of the entrepreneur;
• The importer gives his UK EORI number starting with “GB” on the customs declaration;
• The importer states his VAT number in the customs declaration.

For parties not registered for VAT, there is still the option to make use of deferred payment. Traders who regularly import goods can benefit from having a DDA. This allows charges, including customs duties, excise duties and import VAT, to be paid once a month via direct debit instead of being paid on individual shipments.

Source: gov.uk

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