New Procedure for VAT Quarters Ending January 2021 Onwards

This affects databases in the UK only.

Background

From 1st January 2021 HMRC have changed the specification of Making Tax Digital Submissions with regard to imports from outside the UK.

The system update 901 described in our previous blog on Postponed VAT changes needs to be run before you make any Making Tax Digital VAT submissions that include January 2021 onwards otherwise your VAT submission may not be compliant, whether you postpone Import VAT or not. If you have not run it yet, high level access users will see a red “Alert” shown at the top of the Optimise menu.

Up to the end of December 2020, if you used the “EC Purchase” VAT Code then the VAT Return Calculation (Snapshot 38) would add the purchase value to box 7 then calculate 20% on the invoices with that code and add that figure to boxes 2 and 4 on the VAT Return.

For goods received from January 2021, you should no longer use the “EC Purchase” VAT Code but instead be using the new “IM” (import) code. This will still add the purchase value to box 7 but no longer affect boxes 2 and 4 on the VAT Return.

However HMRC still want you to record on the VAT Return (in boxes 1 and 4) the amount of Import VAT your imports incurred during that quarter on imports from 1st January 2021. This figure should not be deduced or calculated yourself, but instead HMRC want you to take this from Postponed Import VAT Statements for your EORI number which you can download monthly from HMRC.

It’s easy to get set up to get postponed import VAT statements and you only have to do this once:-

1. On your web browser, go to https://www.gov.uk/guidance/get-your-postponed-import-vat-statement
2. Click “START NOW“. You need to enter your VAT Return credentials then other company info that you should know.
3. Eventually you will get to the following screen (bookmark it): https://www.tax.service.gov.uk/customs/payment-records/postponed-vat
4. This should show if you have any monthly statements. You can download the statements from here.

New procedure you need to adopt

1. Before submitting each VAT Return, you need to have downloaded the Postponed Import VAT Statements for the three months covered by the VAT quarter. They are available to download shortly after each month has ended so you don’t have to wait until the end of the VAT quarter. Use the second URL above to get them (login with your VAT return credentials), i.e. https://www.tax.service.gov.uk/customs/payment-records/postponed-vat
2. You should file these statements safely in the same way as you would any other VAT-related documents, such as the VAT report.
3. You only need the total Import VAT figure shown at the end of the Statements.
4. Post a nominal recurring journal (the code is “ImportVAT”) for either the sum of the 3 Import VAT Statements or post 3 journals, one per month. (The journal is a 2-way journal between Sales VAT and Purchase VAT for the amount of Import VAT that has been postponed during each month. This journal will land on boxes 1 and 4 of your VAT Return).

If you have any queries please contact our helpdesk.