What is "Postponed VAT accounting" and how does it work?
The Budget came with some news relating to post-Transition period easements. For the full 2020 Budget, click here.
The Government confirmed that the previous policy of postponing VAT at the time of import will become a permanent policy from 1 January 2021, when the Transition period ends. This is good news for businesses as it will slightly ease the pressure when importing post-Transition period.
This policy applies across the board for all imports, both EU and ROW (Rest Of the World).
The exact wording from the Policy Paper reads:
The government wants to make the most of the opportunity of leaving the EU to make our VAT and excise system more business-friendly, while continuing to recognise the significant contribution of VAT and excise towards the public finances. The Budget meets the government’s commitment to review the alcohol duty regime to ensure it works for UK producers and consumers. Postponed VAT accounting will also change the time when import VAT is due to HMRC, providing an important cash flow advantage to businesses across the country that are integrated in international supply chains as they adapt to the UK’s position as an independent trading nation.
VAT Postponed Accounting – From 1 January 2021 postponed accounting for VAT will apply to all imports of goods, including from the EU. This will provide an important boost to those VAT registered UK businesses which are integrated in international supply chains as they adapt to the UK’s position as an independent trading nation.
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