Import of goods from the EU and worldwide from 1 January 2021
16 February 2021
The termination of the Brexit transitional period on 31 December 2020 brought to an end previous VAT accounting practices relating to EU cross-border trade in goods.
From 1 January 2021 imports from the EU are treated in the same way as goods arriving from any other country. Import VAT, duty and procedures are complex and those procedures are administered separately within HMRC and subject to difference compliance requirements. Inevitably there is some crossover to the VAT regime given the availability of Postponed VAT Accounting (see 2 below).
As a result of leaving the EU, there are three main compliance requirements for the NHS when buying goods from the EU. These requirements now apply to imports from both the EU and worldwide. Special rules and procedures apply to, amongst other categories, goods moving to or from Northern Ireland, controlled or licenced goods and consignments with a value of £135 or less. The following guidance does not apply to those categories.
Before considering the information below, as Liaison has previously advised, the essential first step is to obtain an EORI number (Economic Operators Registration Identification). Without this you will not be able to import or export goods.
The three main compliance requirements for importing goods are:
1. Making import declarations.
This requires detailed information for each import consignment to be provided to HMRC. This information is normally required at the point the consignment arrives in the UK, however for the period from 1 January to 30 June 2021, importers can opt to delay these declarations and submit a supplementary declaration at a later date (within 175 days of import) However, importers must make an entry in their own records at the time goods are imported (EIDR – Entry In Declarants Records).
Full import declarations must be made for imports made from 1 July 2021 onwards. Importers can if they want, opt to make full declarations from 1 January 2021.
2. Pay Import VAT to HMRC – Postponed VAT Accounting
With the exception of goods that qualify for relief (e.g. charitably funded medical equipment), all imported goods are subject to Import VAT. This must be paid to HMRC. Prior to 1 January 2021, import VAT had to be paid to HMRC at the point of import subject to special deferment arrangements.
From 1 January 2021, importers can use Postponed VAT Accounting (PVA). PVA allows for import VAT to be declared in Box 1 of the VAT return in the month in which the import takes place. The import value of goods is not always the same as the invoice value. It may therefore be necessary to estimate the amount of import VAT that is payable and adjust for this when the import VAT statement is available (see below).
Businesses that are allowed to reclaim the VAT they incur can net-off import VAT on the same VAT return by entering the same VAT figure in Box 4. Generally, the NHS is not allowed to reclaim VAT on the purchase of goods including those that have been imported, so the entry in Box 1 amounts to the payment of import VAT to HMRC in the same way that Acquisition Tax did pre-January 2021.
The majority of goods will arrive in the UK via a freight forwarding company or for example, a parcel operator. They will contact your organisation to establish if you want to use PVA or pay the import VAT immediately. If you elect to pay the VAT immediately, the intermediary will pay the VAT (and any duty) to HMRC on your behalf. They will then invoice you for the VAT and duty. In these circumstances you should ensure that you do not duplicate this payment by making a PVA entry in Box 1 of your VAT return.
Use of PVA is compulsory where you have elected to delay making your import declaration in the period from 1 January to 30 June 2021 (see 1 above). In all other cases use of PVA is optional, but we make the following recommendations:
- That you adopt a consistent approach across your organisation for all goods arriving from overseas. It should be noted that PVA is more beneficial in cash flow terms for businesses that submit VAT returns each quarter. As NHS organisations submit their VAT returns each month, the cash flow advantage of using PVA is negligible.
- All the departments in your organisation that are concerned with the import of goods are made aware of these new procedures.
- Details of all imports and related documentation is copied to your finance department to ensure correct VAT accounting and minimise the possibility of duplication or omission.
HMRC will issue import VAT statements. The statements should be available to each importer to view online in the first half of each month; however, we are aware that some of our clients are experiencing difficulties in obtaining these statements. We are liaising with HMRC to resolve this issue.
Normally each statement will show the value of import VAT paid for the preceding month, however where delayed declarations are made between 1 January and 30 June 2021 (see 1 above), the next monthly statement will show the amount of import VAT due on that declaration. The value of estimated import VAT declared on a VAT return should be reconciled to the VAT amount shown on the import VAT statement and adjustments made as necessary. Remember if the import has been undervalued on the VAT return, additional VAT will be due to HMRC.
An EC Sale list is no longer required but Intrastat declarations are still required (if arrivals/EC imports are greater than £1.5m per annum).
3. Import Duty
In addition to import VAT, Import Duty may also be payable. Whether Duty is payable will be determined by the origin of the goods and the Customs classification of each consignment. If there is a liability to Duty, it is also payable to HMRC at the point of import, although payment can be deferred by one month by applying to HMRC for a Duty Deferment Account (DDA). A DDA is compulsorily required if an importer opts to delay their import declarations (1 above) whether or not the goods are liable for any Duty.
It should be noted that the value for import VAT is the value of the goods including any duty payable.
Making declarations and the use of agents
The information required on Customs declarations can be complex. The required data includes the commodity (or Tariff) code, weight, volume and value. As stated above, the import value may not be the same as the invoice value.
Making declarations also requires the use of specialise software that links to HMRC’s systems:
CHIEF – Customs Handling of Import and Export Freight), or
CDS – Customs Declaration service. This will eventually replace CHIEF.
It is for reasons of complexity and the requirement for specialist software that HMRC and Liaison recommend that importers use agents to make the declarations. Agents could be:
- freight forwarders
- customs agents or brokers
- fast parcel operators
Most will be responsible for moving the goods and can make declarations. Others may specialise in making declarations and providing other support services.
Commonly, it will be the supplier that appoints someone to transport the goods from their premises to their customer’s door. If this is the case and you are an occasional importer, it may be easier to contact the supplier or their appointed agent in respect of every separate consignment. The supplier’s agent may be able to make import declarations on behalf of your organisation, but their willingness and capability may vary. The intermediary must be based in the UK. They will be required to be authorised by HMRC for simplified declaration procedures before they submit a declaration on behalf of an importer. Intermediaries will require the importer’s detailed instructions of what they are being asked to do.
HMRC have advised of high demand for these services and to take early action. While new procedures are becoming established the intermediaries will be busy. Where you have made the appointment there will be a responsibility to provide details about your transactions. We know that most fast parcel operators are asking importers for information such as:
- VAT/EORI number
- Whether you want to opt in to PVA. The alternative is that the operator will pay the Import VAT to HMRC on your behalf and invoice you.
- The reason for import or Customs Procedure Code
- Commodity Code
- Duty Deferment Account number or do you want to use the operator’s account
You will need to confirm with the operator that they are taking responsibility for completing the import declaration (point 2 above).
HMRC provides a list of import agents. Liaison cannot act on behalf of its clients in making import declarations. This function is best undertaken by specialist operators that have a history of dealing with the transit of goods and that have the detailed knowledge of cross border procedures and the necessary software links to HMRC.
Goods moving between Great Britain and Northern Ireland
Because of the Brexit Northern Ireland Protocol different rules apply when moving goods between GB and Northern Ireland
If an organisation moves goods to or from Northern Ireland, they will need a separate EORI number that starts with XI. To get an EORI number that starts with XI, they must already have an EORI number that starts with GB.
This update does not provide details on the procedures for trading with Northern Ireland, but organisations should be aware of these differences and HMRC provides a support service specifically dealing with Northern Ireland trade issues: https://www.gov.uk/guidance/trader-support-service
Repair of equipment – returned goods relief
When equipment has been purchased from an overseas supplier it is not uncommon for the NHS to return items to the supplier to be repaired. By default, the repaired goods returning to the UK will be subject to import VAT even if there is no cost to the repair. However, relief from import VAT is available on repaired goods. This is called outward processing relief and requires the prior authorisation of HMRC. This should be obtained before the goods are exported to the supplier.
Further HMRC guidance can be found here