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Postponed VAT Accounting

Postponed VAT Accounting

Overview

‘Accounting for import VAT on your VAT Return’, also referred to as Postponed VAT accounting was introduced by HMRC on January 1st, 2021 and allows businesses to account for VAT on the import of goods (from any country) immediately, rather than paying it immediately.

This legislation was introduced as a result of the changes on importing goods following Brexit and is designed to avoid impact on cashflow for importers.

VAT Return and VAT Accounting

Postponed VAT accounting requires the recording of both output vat (vat receivable) and input vat (vat payable) transactions in line with the following HMRC guidance

Box 1   VAT due on sales and other outputs

Include the VAT due on imports accounted for through postposed VAT accounting.

Box 4   VAT reclaimed on purchases and other inputs

Include the VAT reclaimed in this period on imports accounted for through postponed VAT accounting.

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

Include the total value of all imports of good, not including any VAT

Dynamics 365 Finance

Supplier Invoices

Supplier Invoices for imported goods should no longer include or account for VAT!

Dynamics 365 Finance will include ‘outside of scope’ VAT setup, with appropriate VAT Groups needing to be assigned to appropriate overseas suppliers to ensure that created zero value vat transactions are excluded from UK VAT Return submissions.

Postponed VAT (General) Journals

Postponed VAT adjustments need to be accounted for via appropriately structured General Journal adjustments, where best practice setup and operation requires the creation and use of a specific and dedicated journal name for the purpose.

The values entered and posted will reflected those detailed on the monthly postponed VAT statement downloaded from HMRC.

Provided below is an example postponement VAT journal …

Postponed VAT Journal

Journal Line #1 effects the creation of the Output VAT (VAT receivable) entries, with the entry of Item VAT Group and VAT Group, resolving the VAT Code that calculates and populates the Goods and VAT values appropriately.

Journal Line #2 effects the creation of the Input VAT (VAT payable) entry, with the entry of the VAT Code whilst ensuring that both Item VAT Group and VAT Group are left blank, ensuring that the journal line is treated as a VAT only value posting i.e., no goods value.

Journal Line #3 balances the voucher, but requires that Item VAT Group, VAT Group and VAT Code are all left blank to ensure that there is no VAT effect.

Further Reading