VAT on Imports: Complete C79 & PVA Guide for CDS Compliance

VAT on Imports: CDS Changes Every Business Must Know

Businesses in the UK must pay VAT on imports on goods worth more than £135. Since Brexit, this has included goods imported from the EU. Due to the potential cashflow implications this may have on businesses, HMRC introduced an alternative to the existing method of collecting this VAT.  There are now two options: C79 and PVA.

From 30 March 2024, the Customs Declaration Service (CDS) will be the UK’s single customs platform, and all businesses will need to declare goods through the service, for both C79 and PVA.  To subscribe, please use this link to subscribe to the Customs Declaration Service. Scroll to the bottom of the screen and click the green “subscribe now” button.

Accounting for VAT on Imports – C79 method

When you import goods, the courier pays VAT at the border on your behalf, which is then recharged to you via invoice before the goods are delivered. The courier then reports this to HMRC as VAT paid on your behalf using the CHIEF (Customs Handling of Import and Export Freight) system or the CDS (Customs Declaration Services) software.  To identify the business, they use both the VAT number and an EORI (Economic Operators Registration and Identifier) number.  Throughout the month, HMRC collate the total VAT paid by the courier on each business’s behalf, and at the end of the month, issues a C79 certificate to each business.  Once the C79 is received from HMRC or downloaded from the CDS, along with the invoice from the courier, the business can then reclaim the VAT paid via the courier’s invoice on their next VAT return.

Example:

A business with a VAT quarter end of 31^st March.  If you import £20k worth of goods on 20^th February, you would receive an invoice from the courier for their services, including £4,000 of VAT. You must wait for the VAT return period to end (in this case, it would be 31^st March) for the VAT paid to be offset against any sales VAT.

This VAT should be included in box 4 of the return for reclaim, which will come from the courier invoice.  The net value should be included in box 7, this will come from the goods supplier invoice.

There are currently two ways to obtain your certificate, depending on how the information was provided to HMRC.

1. If the person making the declaration used the CHIEF service, you will receive a C79 certificate through the post.  This system is being closed by HMRC and will soon cease.
2. If the person making the declaration used Customs Declaration Service software you will need to download the certificate online each month via your gov.uk login.

For further information see the HM Revenue & Customs guidance by following this link:

Postponed VAT Accounting method – PVA

Understandably, having to pay VAT on imports from within the EU that were historically zero-rated could cause issues for UK businesses.  The postponed VAT accounting (PVA) was introduced to help businesses with the impact that import VAT would have on cash flow following the change.  PVA means that you “postpone” the import VAT, i.e., VAT is not paid at the border but instead, it must be declared on your next VAT return. You will not need to pay the VAT and reclaim it later, the VAT is declared and reclaimed on the same return so there is no cashflow impact.

Any VAT-registered business in the UK can use PVA and you do not need to make an application, i.e., you can use it immediately. You will however need to be registered for the customs declaration service. The freight forwarder will then notify HMRC using Customs Declaration Service software, again using your VAT and EORI number to identify your business. You will get an online schedule of imports which need to be downloaded monthly from the HMRC website, these need to be retained as part of the accounting records.  Please note that you can only access a statement for 6 months from the date that it has been published. Statements older than 6 months old are archived and not retrievable. An agent is not able to access these reports on behalf of a business.

Example:

A business with a VAT quarter end of 31^st March.  If you import £20k worth of goods on 20^th February, you would receive an invoice from the courier for their services only, they would report the VAT being postponed to HMRC using your EORI and VAT numbers.  At the end of that month, you will be able to download the monthly statement.  This is then included in your next VAT return.

This VAT should be included in both box 1 and box 4, this will come from the PVA statement.  This will have a net effect on the VAT due to HMRC.  The net value included in box 7 of the return will come from the goods supplier invoice.

For further information on VAT on Imports, please see HM Revenue & Customs guidance by following these links:

• https://www.gov.uk/guidance/check-when-you-can-account-for-import-vat-on-your-vat-return
• https://www.gov.uk/guidance/get-your-postponed-import-vat-statement
• https://www.gov.uk/guidance/understanding-your-monthly-postponed-import-vat-statements

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