Tax experts welcome relief from Brexit burden for importers

Known as ‘postponed accounting’, UK importers who are registered for VAT will account for import VAT as an entry in the VAT return, rather than paying it at the time of import or by using a monthly deferral account. This will represent a significant cashflow easement to importers as the declaration and recovery of VAT will become an administrative accounting procedure wholly within the VAT return. The obligation to pay customs or excise duty at the time of import is unaffected by postponed accounting, as these are separate taxes.

Alan McLintock, Chair of CIOT’s Indirect Taxes Committee, said:

“This is excellent news for all importers, large and small. Postponed accounting will help cut the cash flow impact of having significant amounts of cash tied up due to the delay between the payment of import VAT and the associated later recovery through the importer’s UK VAT return.

“Even though the expectation is that the UK will leave the EU with a negotiated deal, this announcement will put many businesses minds at rest and there will be one less thing to worry about next year.”

A number of other significant indirect taxes announcements were made in today’s Budget.

From 1 December 2020, VAT will be removed from digital publications, making it clear that they are entitled to the same VAT treatment as their physical counterparts, recognising that the tax system must continually evolve to keep up with technological developments. In addition, following a long campaign in the UK, the VAT on women’s sanitary products (known colloquially as the ‘tampon tax’) will be removed from 1 January 2021.

Alan McLintock added:

“Whilst these particular developments are welcome, they should not trigger a proliferation of changes to the VAT system simply because we have additional flexibility with being outside the EU.

“Indeed, the government should follow its own consultation framework; the engagement by government with stakeholders on the new Plastic Packaging Tax, and upon which further consultation has been launched today, is an appropriate example.”

Notes for editors

These measures appear in the following Budget documents -

Postponed accounting: Paragraph 2.234 on page 95 of the Red Book

Digital publications: Paragraph 2.233 on page 95 of the Red Book

Tampon tax: Paragraph 2.235 on page 95 of the Red Book

Plastic Packaging Tax: Paragraph 2.214 on page 93 of the Red Book