Postponed accounting for Great Britain businesses

Summary

How to use postponed accounting for Great Britain businesses in Sage Accounting.

Resolution

If you import goods, you'll most likely pay import VAT and duty. This applies if the goods you buy are subject to VAT in the UK. For most imported goods the standard 20% VAT rate is applied.

Postponed accounting allows you to declare and recover import VAT in the same VAT return, rather than paying import VAT on or soon after the goods arrive at the UK border and then reclaiming this on your next VAT return.

This can be done on a transaction by transaction basis and means businesses don't have to pay import VAT for goods at the UK border or reclaim the VAT from HMRC.

Great Britain - England, Scotland and Wales

Businesses registered in Great Britain can use postponed accounting for importing goods from the EU and the rest of the world.

Northern Ireland

Businesses registered in Northern Ireland can use postponed accounting for importing goods from outside the EU. Importing from the EU continues as before Brexit.

Make sure you have an EORI number

To import goods, you'll need an Economic Operators Registration and Identification number (EORI).

HMRC guidance - Get an EORI number

About postponed accounting

Is this right for your business?>

If you regularly buy from outside the UK it can significantly improve your cashflow, as you don’t pay VAT on things you haven’t received yet.

If you want to use postponed accounting, just select the option when recording your purchase invoice and we'll automatically apply the correct VAT and update the VAT return for you.

How it works>

To understand the impact postponed accounting could have on your business, compare the same transaction posted with, and without postponed accounting.

On 1 January your business buys goods from the USA for purely business use. It costs £20,000.

Without postponed accounting

Date		Invoice amount	Amount paid
1 January	You receive an invoice from your supplier for the cost of the goods. The VAT is zero rated, so the invoice is just for the net value.	£20,000	£20,000
3 January	Your goods arrive. You have to pay the duty and import VAT before your goods are released from the warehouse. If you use an import agent, they will pay the duty and import VAT for you and then charge you and add their fees. You receive and pay the invoice from your import agent for £2,000 duty and £400 VAT and the £4,000 Import VAT due on the purchase.	£6,420	£6,420
9 April	You submit your VAT Return. The VAT on this transaction is recorded in box 4 of your VAT Return. so you can now reclaim the total VAT paid.		-£4,400

Date

Invoice amount

Amount paid

1 January

You receive an invoice from your supplier for the cost of the goods. The VAT is zero rated, so the invoice is just for the net value.

£20,000

3 January

Your goods arrive. You have to pay the duty and import VAT before your goods are released from the warehouse.

If you use an import agent, they will pay the duty and import VAT for you and then charge you and add their fees.

You receive and pay the invoice from your import agent for £2,000 duty and £400 VAT and the £4,000 Import VAT due on the purchase.

£6,420

9 April

You submit your VAT Return. The VAT on this transaction is recorded in box 4 of your VAT Return. so you can now reclaim the total VAT paid.

-£4,400

Using postponed accounting

Date		Invoice amount	Amount paid
1 January	You receive an invoice from your supplier for the cost of the goods. The VAT is zero rated, so the invoice is just for the net value. As you're using postponed accounting, you estimate the VAT at 20%. The estimated VAT of £4,000 is recorded boxes 1 and 4 on your next VAT return and the net value impacts box 7.	£20,000	£20,000
3 January	Your goods arrive. As you have postponed the VAT, the import VAT is not paid. If you use an import agent, they will pay the duty and then charge you and add their fees. You receive and pay the invoice from your import agent for £2,000 duty and £400 VAT.	£2,400	£2,400
9 April	Submit your VAT Return. The estimated VAT is recorded in boxes 1 and 4 of your VAT Return. As these entries cancel each other off, no VAT is due. The purchase is recorded in box 7.

Date

Invoice amount

Amount paid

1 January

You receive an invoice from your supplier for the cost of the goods. The VAT is zero rated, so the invoice is just for the net value.

As you're using postponed accounting, you estimate the VAT at 20%.

The estimated VAT of £4,000 is recorded boxes 1 and 4 on your next VAT return and the net value impacts box 7.

£20,000

3 January

Your goods arrive. As you have postponed the VAT, the import VAT is not paid.

If you use an import agent, they will pay the duty and then charge you and add their fees.

You receive and pay the invoice from your import agent for £2,000 duty and £400 VAT.

£2,400

9 April

Submit your VAT Return. The estimated VAT is recorded in boxes 1 and 4 of your VAT Return. As these entries cancel each other off, no VAT is due. The purchase is recorded in box 7.

Record transactions using postponed accounting

The way you record your Import VAT will usually depend on when you receive your documents.

Estimate the VAT when you receive your supplier's invoice
This is likely to be the most common scenario. Consider this method when there is likely to a be a long gap between receiving the invoice for the goods and receiving the monthly statement (C79) from HMRC
Don't estimate the VAT on your supplier invoice and record the import VAT when you get your monthly statement from HMRC (C79 certificate).
Consider this method if you receive your monthly statement and supplier invoice in the same period
Declare the postponed VAT when you receive the invoice from your Import agent
Consider this method when your import agent provides an accurate postponed VAT value for you

Estimate the VAT on your supplier's invoice and correct it when you get your statement>

This is where you estimate the amount of Import VAT and declare it when you record the invoice from your supplier. In most cases the import VAT is charged at the same rate as a domestic purchase.

When you receive your monthly statement from HMRC (C79 certificate), check the VAT on the statement matches the VAT declared on the invoice. Record any differences as a journal to adjust the VAT return.

As an example, you buy goods worth £20,000 from a supplier in Germany. The import VAT due will be around £4,000 so you include this on your supplier invoice. When you get your monthly statement from HMRC the actual import VAT is £3998, so you need to make an adjustment to add to your next VAT return.

Enter the supplier invoice

Select your supplier.
Enter the details of the goods purchased as normal.
The VAT rate will automatically be set to Zero Rated. Change the VAT Rate to Standard or Lower Rate as required.
Once entered all the information, select Save.

This automatically applies postponed VAT on your invoice. Although VAT is not shown on the invoice, we estimate the VAT for you and record it as a VAT on a sale (Box 1) and VAT on a purchase (Box 4) on the VAT return.

Adjust the VAT when you receive your monthly statement (C79 certificate).

Once you receive your monthly statement from HMRC, check that the VAT estimated on the invoice matches the import VAT due on the statement.

Use the Overseas Purchase of Goods report to help you reconcile your VAT return, and make VAT adjustments where required. This now includes both EU and ROW sales and shows which invoices have estimated VAT.

If there is a difference between the estimated VAT and the VAT on your monthly statement, record an adjustment using a journal.

In our example, we estimated the VAT at £4000 but the monthly statement is showing £3998 so we need to enter a VAT adjustment journal for the £2.

From Journals, select New Journal.
Enter the details.
Add amount of the adjustment on two lines, one VAT on sales and one for VAT on purchases.
To reduce the VAT, record VAT on sales as a Debit and VAT on purchases as a Credit.
To increase VAT, record VAT on sales as a Credit and VAT on purchases as a Debit.
Make sure you select the Include On VAT Return check box.

Record the import VAT when you get your monthly statement (C79 certificate)>

This is where you don't estimate the Import VAT and wait to record the import VAT until you get your monthly statement.

Use the Overseas Purchase of Goods report to help you reconcile your monthly statement, and make VAT adjustments where required. This now includes both EU and ROW transactions.

For example, you buy goods worth £20,000 from a supplier in Germany. When you get your monthly statement from HMRC the actual import VAT is £3998, so you record this as a VAT journal and update your VAT return.

Enter the supplier invoice

Select your supplier.
Enter the details of the goods purchased as normal.
The VAT rate will automatically be set to Zero Rated and VAT is not included on your VAT return.

Record the VAT when you receive your monthly statement

Once you receive your monthly statement from HMRC, record the import VAT using the value from your statement. In our example, the VAT on the statement is £2 less than the amount we estimated.

From Journals, select New Journal.
Enter the details.
Add amount of the import VAT on two lines, one for VAT on Sales as Credit and one for VAT on purchases as a Debit.
Make sure you select the Include On VAT Return check box.
Ledger Account Incl in VAT Return Debit Credit
2200 VAT on Sales Yes
3998
2201 VAT on Purchases Yes 3998

Ledger Account	Incl in VAT Return	Debit	Credit
2200 VAT on Sales	Yes		3998
2201 VAT on Purchases	Yes	3998

Declare the VAT when you receive the invoice from your import agent>

This is when you declare the VAT when you receive the invoice from your import agent, when your import agent provides an accurate postponed VAT value for you.

Record invoice from your import agent

Make sure you have set up a supplier record for your import agent and selected the Is Import agent check box. These could be an import agent, freight forwarder or Customs and Excise.

Select your import agent.
Select Use postponed accounting to deal with import VAT.
Record the details from the importer invoice.
On a separate line, enter a VAT only line for the import VAT, using the relevant VAT rate.

The VAT is recorded and then automatically deducted from the same invoice.

NOTE: When you receive the invoice from your import agent, ensure that the created purchase invoice is recorded with Zero VAT to ensure the duty is being recorded against the import agent and not the physical purchase.

Switch postponed accounting on by default

If you always declare the import VAT on the import agent invoice, to help to prevent errors choose to have the Use postponed accounting check box automatically selected (you can amend this on an invoice by invoice basis).

From Settings, within the Financial Settings area, select Accounting Dates & VAT.
Scroll down and select the Use Postponed Accounting check box.
Select Save.

Postponed accounting and the VAT return>

The VAT is recorded as both a sales and purchase on your VAT return, effectively cancelling each other out.

If you have selected Standard or Lower Rate, the VAT amount is recorded in:

Box 1 - VAT due in this period on sales and other outputs
Box 4 - VAT reclaimed in this period on purchases and other inputs

The net amount is recorded in:

Box 7 - Total value of purchases and all other inputs excluding any VAT

Flat rate VAT and postponed accounting>

If you are on the flat rate VAT scheme, any imports purchased under postponed accounting now fall outside the turnover amount used to calculate the amount of VAT due.

The VAT is recorded on your VAT return in:

Box 1 - VAT due in this period on sales and other outputs
Box 4 - VAT reclaimed in this period on purchases and other inputs

The net amount is recorded in:

Box 7 - Total value of purchases and all other inputs excluding any VAT

Previously, the VAT amount was also included in box 6 and counted as part of your turnover, impacting the VAT amount due in Box 1.

See an example:

Your business has a flat rate of 8%. You import goods worth £100 with 20% VAT.

Previously (transactions dated before 1 June 2022)

The net amount is recorded is Box 6. The VAT due is calculated from the total net amount in Box 6 multiplied by your VAT rate %.

VAT due is £100 x 8 % = £8 (Box 5).

Now (transactions dated after 1 June 2022)

The net amount is now recorded in Box 7 and not in Box 6.

The VAT amount is recorded in Box 1 and Box 4.

VAT due is £8 (Box 1) - £8 ( Box 4) = £0 ( Box 5).

Solution Properties

Solution ID: 222001000101283
Last Modified Date: Wed Oct 18 10:31:39 UTC 2023
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Postponed accounting for Great Britain businesses

Summary

Resolution

Make sure you have an EORI number

About postponed accounting

Is this right for your business?>

How it works>

Without postponed accounting

Using postponed accounting

Record transactions using postponed accounting

Estimate the VAT on your supplier's invoice and correct it when you get your statement>

Enter the supplier invoice

Adjust the VAT when you receive your monthly statement (C79 certificate).

Record the import VAT when you get your monthly statement (C79 certificate)>

Enter the supplier invoice

Record the VAT when you receive your monthly statement

Declare the VAT when you receive the invoice from your import agent>

Record invoice from your import agent

NOTE: When you receive the invoice from your import agent, ensure that the created purchase invoice is recorded with Zero VAT to ensure the duty is being recorded against the import agent and not the physical purchase.

Switch postponed accounting on by default

Flat rate VAT and postponed accounting>

See an example:

Related Solutions

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