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Brace for Brexit 2

How it works

Postponed accounting will be introduced on 1 January 2021. This will mean that a VAT registered business will not pay VAT on imported goods when they arrive in the UK. The VAT payment will be postponed and instead declared in Box 1 and Box 4 of the next VAT return submitted by the business. The net payment for the goods and any duty will be included in the Box 7 inputs box.

Cash flow boost for business

I have worked in VAT long enough to remember when we last had postponed accounting in the UK before it was abolished in 1984 by Chancellor Nigel Lawson. The abolition produced a one-off cash flow boost of £1bn for the government because it resulted in a time delay between paying VAT at the border and then claiming input tax. The opposite now applies and there will be negative cash flow outcome for the government. An importer that is not VAT registered will still pay VAT when the goods arrive in the UK.

VAT returns

HMRC has made it very clear that trading in goods with EU countries will be the same as for non-EU countries. References to goods sold into the EU as ‘dispatches’ will end, as will the description of ‘arrivals’ for goods coming into the UK.

Does that mean that Boxes 2, 8 and 9 of our nine-box VAT return can be removed after 1 January 2021, because they only relate to EU sales and purchases of goods, which will no longer get special treatment?

The answer is no, because these boxes will still be needed by businesses based in Northern Ireland, which will continue to make EU acquisitions and dispatches as part of the Northern Ireland Protocol. But for businesses based in Great Britain, only six boxes will be relevant from 1 January 2021.


Janet is VAT registered and imported £50,000 of women’s clothing and £5,000 of children’s clothing on 31 January 2021. She will resell the goods in the UK. Janet will declare £10,000 (20% x £50,000) in Box 1 of her VAT return that includes January 2021, and claim the same amount as input tax in Box 4 because the goods are being used for a taxable business purpose. The net expense of £55,000 is included in Box 7. No VAT is payable on the children’s clothing because they are zero-rated.

Key issues

It is important to be clear on three issues:

  • Postponed accounting will apply to all imports of goods from 1 January 2021 ie EU and non-EU imports.
  • Customs declarations on imports of non-controlled goods can be deferred by up to six months until 1 July 2021. But the postponed accounting entries on VAT returns must still be made according to the date of the import, even if this involves an estimation of the figures.
  • The Box 4 entry on VAT returns must go through the same input tax tests as a purchase invoice from a UK supplier, ie adjusted for any exempt, non-business or private use. This claim will be supported by C79 documents issued by HMRC.

  • Conclusion

    Going back to the early 1980s, when I worked for Customs and Excise in Milton Keynes, postponed accounting on imports seemed to work very well. That was in the days when a business had to get permission from the department to use a computer to complete its VAT returns! Most smaller businesses operated manual bookkeeping systems such as Kalamazoo.

    I am therefore confident that the reintroduction of postponed accounting in 2021 will not be a big problem for our clients. But to quote the boy scouts’ motto: Be Prepared.