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How do I post import VAT and duty on goods purchased from a country outside the UK?

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Summary

This article explains how to process import VAT and duty on good in Sage 50 Accounts.

Description

 NOTE: This article is supplementary to the VAT Notice 702 Imports, and deals with claiming the import VAT on goods only. If services have been supplied, or if you need to clarify whether import VAT should be reclaimed or not, you should contact your local VAT office.

When you purchase goods from a country outside the UK, import VAT may be applied. Normally, your supplier invoice doesn't contain any VAT but a separate invoice is supplied from the import agent detailing any import VAT and duty they've paid on your behalf at customs. If your company is registered for VAT you can normally reclaim the import VAT providing you have supporting C79 certificates from HMRC.

Since leaving the EU on 1 January 2021, Postponed VAT Accounting was introduced which means import VAT due on goods arriving in the UK from anywhere in the world can now be accounted for on your VAT Return rather than having to pay the VAT as soon as the goods arrive at the border. If postponed VAT Accounting is used then the value of import VAT that has been postponed will no longer be included on the import agent invoice and will instead be confirmed on a monthly statement available from HMRC.

NOTE: Please note that if you are based in Northern Ireland this will only apply to goods imported from outside the EU.

Resolution

 

EXAMPLE: For the purpose of this article the following example will be used:

  • A purchase invoice has been received from Germany.
  • The value of the invoice from the supplier is $1,100.
  • The exchange rate is 1.1.
  • There is an import VAT invoice from the import agent for £200. 

    If postponed VAT Accounting is used then the value of import VAT that has been postponed will no longer be included on the import agent invoice and will instead be confirmed on a monthly statement available from HMRC.

  • There is an invoice for duty from the import agent for £100 plus £20 VAT.

Create a supplier record for the import agent

You need to create a new supplier record to record the invoice for the import duty and VAT.

  1. Click Suppliers then click New.
  2. Complete the supplier record as follows:
    A/C* Enter the account reference for the import agent account, for example, IMPORTS.
    Name Enter the account name, for example, Import Company.

    Complete any other information as required.

  3. Click Save then click Close.

When using Postponed VAT Accounting

When using Postponed VAT Accounting, you can post supplier invoice to include the postponed VAT. However, the postponed VAT amount is only an estimate until you receive your monthly statement from HMRC. If there is a discrepancy, you should then post an adjustment to account for this.

There are two ways you can account for postponed VAT in Sage 50cloud Accounts v27:

Option 1 Post one invoice that includes both the goods and the Postponed VAT. Then when you receive the monthly statement from HMRC, if the Postponed VAT is different, post an adjustment.
Option 2 Post an invoice for the goods, not including the Postponed VAT. Then when you receive the monthly statement form HMRC, post a separate VAT only invoice for the Postponed VAT.

Option 1

Post an invoice for the purchase of goods and import VAT
  1. Click Suppliers then click Batch invoice.
  2. To record the supplier invoice, enter the product amount in the Net column and the Import VAT amount in the VAT column, for example:

    If you use Foreign Trader, you can create the supplier's account as a dollar account and enter the supplier invoice as a dollar value. For example, enter an exchange rate of 1.1 then enter the following:
    A/C* Date* N/C* Details Net T/C* VAT
    Supplier Date Nominal code Details 1,100.00 T18

    220.00

     

    If you are not using the Foreign Trader option, you have to enter the supplier invoice as its equivalent sterling value, for example:

    A/C* Date* N/C* Details Net T/C* VAT
    Supplier Date Nominal code Details 1,000.00 T18 200.00
    NOTE: By default, T18 is the postponed VAT code, but may differ depending on the tax codes you already have. 

  3. Click Save then click Close.
Post an invoice for the import duty
  1. Click Suppliers then click Batch invoice.
  2. To record the supplier invoice for import duty, enter the relevant details in the boxes provided. For example:
    A/C*
    Date*
    N/C*
    Details
    Net
    T/C*
    VAT
    IMPORTS Date 5101 Import duty 100.00 T1 20.00
    Generally VAT is charged on duty at the same rate as the item being imported. However, if you do not know which VAT rate to apply, you should contact your local VAT office.

  3. Click Save then click Close.
Post an adjustment if the Postponed VAT amount is different

NOTE: For these examples, let us assume the difference is $11/£10 at the same exchange rate of 1.1.

If HMRC statement amount is more
  1. Click Suppliers then click Batch invoice.
  2. To record the adjustment, leave the Net amount as zero and enter the difference in the VAT column, for example:

    If you use Foreign Trader, you can create the supplier's account as a dollar account and enter the supplier invoice as a dollar value. For example, enter an exchange rate of 1.1 then enter the following:
    A/C* Date* N/C* Details Net T/C* VAT
    Supplier Date Nominal code Details 0.00 T18

    11.00

     

    If you are not using the Foreign Trader option, you have to enter the supplier invoice as its equivalent sterling value, for example:

    A/C* Date* N/C* Details Net T/C* VAT
    Supplier Date Nominal code Details 0.00 T18 10.00
    NOTE: By default, T18 is the postponed VAT code, but may differ depending on the tax codes you already have.

  3. Click Save then click Close.
If HMRC statement amount is less
  1. Click Suppliers then click Batch credit.
  2. To record the adjustment, leave the Net amount as zero and enter the difference in the VAT column, for example:

    If you use Foreign Trader, you can create the supplier's account as a dollar account and enter the supplier invoice as a dollar value. For example, enter an exchange rate of 1.1 then enter the following:
    A/C* Date* N/C* Details Net T/C* VAT
    Supplier Date Nominal code Details 0.00 T18

    11.00

     

    If you are not using the Foreign Trader option, you have to enter the supplier invoice as its equivalent sterling value, for example:

    A/C* Date* N/C* Details Net T/C* VAT
    Supplier Date Nominal code Details 0.00 T18 10.00
    NOTE: By default, T18 is the postponed VAT code, but may differ depending on the tax codes you already have. 

  3. Click Save then click Close.

Option 2

Post an invoice for the purchase of goods
  1. Click Suppliers then click Batch invoice.
  2. To record the supplier invoice, enter the product amount in the Net column and leave the VAT amount as zero, for example:

    If you use Foreign Trader, you can create the supplier's account as a dollar account and enter the supplier invoice as a dollar value. For example, enter an exchange rate of 1.1 then enter the following:
    A/C* Date* N/C* Details Net T/C* VAT
    Supplier Date Nominal code Details 1,100.00 T18

    0.00

    If you are not using the Foreign Trader option, you have to enter the supplier invoice as its equivalent sterling value, for example:

    A/C* Date* N/C* Details Net T/C* VAT
    Supplier Date Nominal code Details 1,000.00 T18 0.00
    NOTE: By default, T18 is the postponed VAT code, but may differ depending on the tax codes you already have. 

  3. Click Save then click Close.
Post an invoice for the import VAT only
  1. Click Suppliers then click Batch invoice.
  2. To record the supplier invoice, enter the product amount in the Net column and the Import VAT amount in the VAT column, for example:

    If you use Foreign Trader, you can create the supplier's account as a dollar account and enter the supplier invoice as a dollar value. For example, enter an exchange rate of 1.1 then enter the following:
    A/C* Date* N/C* Details Net T/C* VAT
    Supplier Date Nominal code Details 0.00 T18

    220.00

     

    If you are not using the Foreign Trader option, you have to enter the supplier invoice as its equivalent sterling value, for example:

    A/C* Date* N/C* Details Net T/C* VAT
    Supplier Date Nominal code Details 0.00 T18 200.00
    NOTE: By default, T18 is the postponed VAT code, but may differ depending on the tax codes you already have. 

  3. Click Save then click Close.
Post an invoice for the import duty
  1. Click Suppliers then click Batch invoice.
  2. To record the supplier invoice for import duty, enter the relevant details in the boxes provided. For example:
    A/C*
    Date*
    N/C*
    Details
    Net
    T/C*
    VAT
    IMPORTS Date 5101 Import duty 100.00 T1 20.00
    Generally VAT is charged on duty at the same rate as the item being imported. However, if you do not know which VAT rate to apply, you should contact your local VAT office.

  3. Click Save then click Close.

When not using Postponed VAT Accounting

Post an invoice for the purchase of goods

This section provides a guide to recording the supplier invoice.

In Sage 50cloud Accounts v27.2 and above a new tax code, T14, has been created to post import of goods with no VAT.


To record this, post a purchase invoices as follows:

  1. Click Suppliers then click Batch invoice.
  2. To record the supplier invoice, enter the details in the boxes provided , for example:

    If you use Foreign Trader, you can create the supplier's account as a dollar account and enter the supplier invoice as a dollar value. For example, enter an exchange rate of 1.1 then enter the following:
    A/C* Date* N/C* Details Net T/C* VAT
    Supplier Date Nominal code Details 1,100.00 T14 0.00

    If you are not using the Foreign Trader option, you have to enter the supplier invoice as its equivalent sterling value, for example:

    A/C* Date* N/C* Details Net T/C* VAT
    Supplier Date Nominal code Details 1,000.00 T14 0.00
    The example represents zero rated items. If you are unsure about the VAT rating for your invoice, you should contact your local VAT office.

  3. Click Save then click Close.

You've now posted the invoice received from your supplier for the goods purchased. The net amount of this purchase invoice is picked up in box 7 on the VAT Return. You must now post a supplier invoice for the duty and import VAT due to HMRC.


Post an invoice for the duty and import VAT

When you receive the invoice from the courier, this is posted to the courier's supplier account. If you haven't yet posted the original invoice from your supplier, please refer to the section above, Post an invoice for the purchase of goods.

You cannot reclaim any import VAT paid until you have received form C79 from HMRC.

If you have received form C79
  1. Click Suppliers then click Batch invoice.
  2. To record the supplier invoice for duty and import VAT, enter the relevant details in the boxes provided. For example:
    A/C*
    Date*
    N/C*
    Details
    Net
    T/C*
    VAT
    IMPORTS Date 5101 Import VAT 0.00 T19 200.00
    IMPORTS Date 5101 Import duty 100.00 T19 20.00
    NOTE: If you prefer, you can use T1 here instead. Both T1 and T19 appear on the VAT Return in boxes 4 (VAT) and 7 (NET). By default, T19 is the non postponed VAT code, but may differ depending on the tax codes you already have. 

    If you are using the Sage default nominal structure, 5101 is the Import Duty nominal code. The import VAT transaction does not affect this nominal code, as the net value is zero.

    Generally VAT is charged on duty at the same rate as the item being imported. However, if you do not know which VAT rate to apply, you should contact your local VAT office.

  3. Click Save then click Close.

You've now posted your duty and import VAT charges. The VAT element is picked up in box 4 in the VAT Return, reclaiming the VAT amount.

You've now completed all of the transactions necessary to reclaim the import VAT and the VAT on duty on goods purchased from countries outside the UK.

If you have not received form C79
  1. Click Suppliers then click Batch invoice.
  2. To record the supplier invoice for duty and import VAT, enter the relevant details in the boxes provided. For example:
    A/C*
    Date*
    N/C*
    Details
    Net
    T/C*
    VAT
    IMPORTS Date 5101 Import VAT 0.00 T9 200.00
    IMPORTS Date 5101 Import duty 100.00 T0 0.00
    IMPORTS Date 5101 Import duty 0.00 T9 20.00
    If you're using the Sage default nominal structure, 5101 is the Import Duty nominal code. The import VAT transaction does not affect this nominal code, as the net value is zero.

    Generally VAT is charged on duty at the same rate as the item being imported. However, if you do not know which VAT rate to apply, you should contact your local VAT office.

  3. Click Save then click Close.

You've now posted your duty and import VAT charges. The VAT element is not included in the VAT Return because you cannot reclaim the VAT until you have received form C79, using a T9 tax code prevents the VAT from appearing on your VAT Return. Once you receive form C79, to reclaim the VAT, post a journal as follows:

  1. Click Nominal codes then click Journal entry.
  2. To reclaim the VAT, enter the relevant details in the boxes provided. The T19 tax code ensures the VAT is now accounted for on your VAT Return  in boxes 4 (VAT) and 7 (NET):
    N/C*
    Details
    T/C*
    Debit
    Credit
    2201 Import VAT adjustment T19 200.00 0.00
    2201 Import VAT adjustment T19 20.00 0.00
    2201 Import VAT adjustment T9 0.00 220.00
    NOTE: If you prefer, you can use T1 here instead of T19. Both T1 and T19 appear on the VAT Return in boxes 4 (VAT) and 7 (NET). By default, T19 is the non postponed VAT code, but may differ depending on the tax codes you already have. 

  3. Click Save then click Close.

You've now completed all of the transactions necessary to reclaim the import VAT and the VAT on duty on goods purchased from countries outside the UK.

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