Save your cash flow: Defer paying VAT and duty on UK imports.

David Rae

If you import into the UK from abroad, then you may not realize that you have options when it comes to defer paying VAT and duty which will help your cash flow.

Where do you start with deferring payments on UK imports?

The first thing that you need to establish is whether the goods that you are importing are liable for duty and/or VAT. Maybe you are importing electrical items such as TVs from a European Union state.

Use this link to look up the commodity code which will then tell you whether duty is liable based on the type of goods being imported and where they are from.

Declaring the origin of the goods is vital to determining the rates that need to be paid. If they are dutiable but are from the European Union then you will not have to pay if the exporter provides a preference statement which will declare the origin of the products.

For consignments over €6,000 the preference statement will also require a REX number which you can register for online. Where you register will change depending on where you are importing from, for instance, you can follow this link for REX application in the Republic of Ireland.

Even if there is no duty then there may still be VAT to pay which will depend on the type of product.

Once you know what you need to pay you have options to pay at the point of import or defer until later.


Customs image

Postponing VAT (PVA)

Postponed VAT Accounting allows an importing business to defer payment of the VAT until their next VAT return is due. That means not having to pay anything up front and the VAT can be reclaimed at exactly the same time.

Any UK vat registered businesses can use PVA through the CDS system on the customs declaration form or you will need to inform your customs agent or freight forwarder to use it.

There are significant advantages to using PVA such as improvements in cash flow as VAT money does not need to be spent or accrued for at the point of import. Less working capital will be required for imports which could mean a potential reduction in costs.

Additionally, there is less administration and often fewer errors as the VAT reporting process is made simpler by accounting for it on the VAT return and reclaiming at the same time.

Deferment account

Deferring means the VAT on imports does not need to be paid during import but is instead allocated to a deferment account.

This account will have an upper limit to the amount allowed per month which may limit the number or value of consignments that you defer.

You can apply for a UK deferment account here.

Use your Freight Forwarder

You could potentially utilize the account of the freight forwarder who is handling your transport. They will most likely have a higher upper limit to their deferment account.

If they are handling your transport, then it is much easier to have them handle the duty and VAT at the same time.

Using a customs agent or freight forwarder also has the advantages of being able to call on their vast experience of importing. If there is a lot of fluctuation in the source or type of goods being shipped, then their knowledge could be invaluable.

Not only will this be the simplest option available, but a freight company will usually have staff dedicated to handling customs and VAT issues and often out-of-normal working hours. Delays at the UK border are often worsened due to it often taking place when there is no-one available to handle queries at the time.

Use the CDS cash account

You could use a CDS cash account which you can apply for here.

Having a cash account means that you will need to have enough funds available before import to cover your payments and that means not deferring. This will involve the most administration of all the methods, but it will give you more direct control over your consignments.

Some businesses choose this simply because they are already set up to handle imports to other countries and they simply want to use similar processes.

Choosing this will depend a lot on how much confidence and experience there is in your business to handle customs more directly.

It is important to note that the Cash Account system with CDS is replacing the Flexible Accounting System (FAS) which was under the old UK CHIEF system.

New businesses or not an Authorized Economic Operator (AEO)

For new businesses who cannot prove their finances sufficiently a cash account may be a useful stop gap until another method can be used.

To apply for a deferment account, you will need to prove your business finances first, which will define the financial limit that you are allowed. Achieving a customs or international supply chain security accreditation such as AEO will grant more trust when applying for a deferment account.

Baxter Freight is AEO accredited and has a dedicated full-time customs team who are experts in working around the complex options available for importing goods.

If you would like to know more about optimising your imports, then please get in touch.

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