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Postponed VAT Accounting: Your How to Guide

Postponed VAT Accounting

Following the UK’s withdrawal from the European Union (EU) the UK is now recognised as a “third country” for the purposes of VAT and customs with the Republic of Ireland. As the UK is no longer a part of the EU’s Single Market and Customs Unions, there are additional implications for any businesses in the Republic of Ireland wishing to import from the UK.

 

Postponed VAT accounting was introduced by the Irish government for Republic of Ireland VAT registered businesses to avoid the payment of import VAT at the point of entry. Many EU states already offer similar measures for VAT imports. Under Section 53A of the Value-Added Tax Consolidation Act 2019 and the Value -Added Tax Regulations 2019 (Regulations 14A) (Amendment) Regulations 2020 businesses are allowed to record the VAT on their VAT return rather than paying it at the point of entry into the country. 

 

The above legislation allows for “accountable persons’” within Ireland who acquire goods from countries outside the EU VAT area (in this case the UK), use the postponed accounting facility. The aim of this blog is to act as a guide for small and medium-sized businesses in Ireland that wish to import goods from the UK and avail of postponed VAT accounting rules.

 

 

What Is Postponed VAT Accounting?

 

It’s a function introduced by the Irish government for businesses registered for VAT in Ireland that import goods from Great Britain (England, Scotland and Wales). There are separate procedures for trading between the Republic of Ireland and Northern Ireland.

 

Before the 1 January 2021, companies that imported goods to Ireland from non-EU countries paid import VAT at the point of entry unless they had a deferral arrangement with Revenue. While the VAT can be reclaimed later, the delay can cause significant impact on the cash flow position for businesses that are already struggling to return to normal activity after the coronavirus (COVID-19) pandemic.

 

With postponed VAT, rather than paying import VAT immediately and claiming it on the next VAT return, the VAT amount is entered as an input and output on the same return.

 

This allows import VAT to be paid and reclaimed on the VAT return in the period that the import takes place, eliminating the need to pay upfront and waiting to reclaim at a later date.

 

 

What It Means For Your Business If You Trade With Northern Ireland

 

Northern Ireland Protocol states special rules for trade between Ireland and Northern Ireland, which means there are no significant changes to the current situation. The VAT rules stay the same for goods but not services.

 

Per the Revenue Commissioners, postponed VAT accounting will not apply to goods brought in from Northern Ireland. These purchases will be treated as EU intra-community acquisitions in line with the current situation.

 

How Does Postponed VAT Accounting Work?

 

Any imported goods to Ireland from Great Britain, should be recorded by showing the import VAT in your VAT return for the current period using the ‘reverse charge’ accounting procedure.

 

This is like the way import VAT is handled on imports from other EU member states.

 

Under postponed VAT accounting businesses that import from Great Britain can file in the relevant fields on their VAT return allowing them to declare and reclaim the VAT amount on the same return.

 

What VAT Rate Do You Need To Pay?

 

Goods that are imported to Ireland are liable to VAT at the same rate that applies to similar goods sold within the State. That means if you import goods at a zero-rate these are also zero-rated at importation.

 

What You Need To Know If You Trade With Great Britain

 

When importing goods from Great Britain and/or another non-EU country, you should ensure your business has up to date systems that can handle the transactions so VAT will be accounted for under the new postponed VAT procedure.

 

Accurate and timely reporting of VAT is advised to reduce the risk of misstating your returns. Extra care should be taken when entering transactions to ensure they are in the correct VAT return period as an error could lead to an underpayment, which could result in Revenue charging interest and penalties.

 

The new amended VAT 3 return form includes an additional field for postponed accounting called PA1. Here is where the value of goods imported under the postponed accounting measure (net plus carriage, insurance, and freight) is captured in your VAT return.

 

The VAT is then accounted for at T1 and T2 (subject to the usual deductibility rules).

 

The year-end VAT Return of Trading Details (RTD) has been amended to include additional fields PA2, PA3 and PA4 to capture the value of goods imported to Ireland. (See “The Revised VAT Return of Trading Details Form” at the end of this blog.)

 

Companies will have to meet certain criteria to avail of postponed VAT accounting. Revenue potentially could exclude traders who don’t fulfil specific requirements such as compliance with tax and customs regulations from postponed accounting. Companies may need to satisfy Revenue of the viability of their business and capacity it has to pay its VAT liabilities.

 

If your business is excluded from the scheme, you will be obliged to pay VAT at the point of entry. 

 

Companies registered for VAT and Customs & Excise (C&E) when the Brexit transition period ended on 31 December 2020, won’t need to apply for postponed accounting – they would have been automatically entitled to avail of the facility.

 

If your company was VAT registered but not registered for C&E on 31 December 2020, you must register for C&E and obtain an Economic Operators Registration Identification (EORI) number.

 

Conclusion On Postponed VAT Accounting

 

Postponed VAT accounting is a facility implemented by the Irish Government to make the import process easier for Irish businesses that trade with Great Britain. It’s a simple measure that aims to ensure Irish businesses that trade with the UK can meet their VAT obligations without significant disruption to their business. 

 

The measure is designed to minimise any disturbance to business cash flow as a result of importing from Great Britain. An added benefit is if you import goods from other non-EU countries, you can also avail of the arrangement.

 

The Revised VAT Return Of Trading Details Form

 

As mentioned in the “What you need to know if you trade with Great Britain” section the amended RTD now includes additional fields PA2, PA3 and PA4 to capture the value of goods imported to Ireland. Below is a simplified visual of this amendment.

 

 

New Postponed Accounting Columns

 

Descriptions

Column 1

Value of supplies of goods and services

Column 2

Value of acquisitions from EU countries Net of VAT, Postponed accounting & VAT free imported parcels

Column 3

Value of Stock for Resale (Purchase, intra-EU acquisitions, postponed accounting & imports)

Column 4

Value of other deductible goods & services (purchases intra-EU acquisitions, postponed accounting & imports)

 

New Postponed Accounting Boxes

 

Description

New PA boxes

 

Total of all figures relating to postponed accounting that 

 

PA2

 

Total value for acquisitions from EU countries Net of VAT, postponed accounting, and VAT free imported parcels

 

PA3

 

Total value of Stock for resale (purchases, intra-EU acquisitions, postponed accounting & imports)

 

PA4

 

Total value of other deductible goods & Services (purchases, intra-EU acquisitions, postponed accounting & imports)

 

 

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