HMRC have recently clarified the correct treatment for the deduction of import VAT paid by a taxable person who is not the owner of the relevant goods.
Following the publication on HMRC Brief 2 (2019), which restated the long-standing policy of who is entitled to reclaim VAT paid on imports under current UK legislation, HMRC received a number of representations from businesses and business representatives about the application of the rules in specific cases. HMRC have now completed their review and have confirmed that the policy outlined Brief 2 (2019) is correct.
It is the owner, whose details (EORI) should be shown in box 8 of the import declaration, who is eligible to reclaim the import VAT, either in accordance with:
- VATA 1994, s 24 (if registered for VAT in the UK); or
- under part XXI of the VAT Regulations 1995 (SI 1995/2518)
HMRC looked at a number of specific examples raised by various businesses and representatives, these included:
- goods temporarily imported for repair;
- goods imported for onward lease; and
- special procedures.
From 1 January 2021, UK VAT registered businesses will be able to use postponed VAT accounting to account for import VAT on their VAT return for goods imported for use in their business from anywhere in the world.
Where a business initially declares goods to customs warehousing or into some other customs special procedure, they can use postponed VAT accounting when they submit the declaration that releases those goods into free circulation.
Businesses do not need to be authorised to use postponed VAT accounting, they simply make the appropriate entry on their customs declaration.
Ordinarily, postponed VAT accounting is not mandatory and businesses can start to use it at any time after 1 January 2021.
However, businesses must use postponed VAT accounting if they import non-controlled goods from the EU to Great Britain from 1 January 2021 to 30 June 2021, and either defer their supplementary customs declaration, or use simplified customs declaration process where authorised and make an entry in declarants records.
As with existing processes, it is the owner of the goods who is using the goods in the course of their business who can use postponed VAT accounting. It means they can declare and recover import VAT on the same VAT return, subject to the normal rules on input tax deduction.
For businesses who currently import goods from non-EU countries, this relieves them from having to pay for the import VAT upfront through their deferment account. Non-owners cannot use postponed VAT accounting.
For further details, see HMRC Brief 15 (2020).