Import VAT, PVA or Deferment: understanding the differences

When importing goods into the UK, businesses understanding the difference between Import VAT, Postponed Import VAT Accounting (PVA), and VAT Deferment is beneficial for effective cash flow management and compliance.

Import VAT

Import VAT is charged on goods brought into the UK from outside the UK (including the EU post-Brexit). It is calculated based on the customs value of the goods, including shipping and insurance costs. Businesses pay this VAT upfront at the point of importation and reclaim it later on their VAT return, creating a cash flow disadvantage on goods that would be standard rated in the UK.

Postponed VAT Accounting (PVA)

Introduced in 2021, PVA allows UK VAT-registered businesses to account for import VAT on their VAT return, rather than paying it immediately at the border. This improves cash flow by removing the need to pay VAT upfront and wait for recovery. Businesses must ensure they correctly declare the import VAT on their VAT return using the monthly postponed import VAT statement from HMRC. Key benefits of PVA:

• Cash flow / Immediate recovery of import VAT
• No need for deferment guarantees

Most UK customs agents will default to using the Import VAT method, so if you wish to use PVA you should instruct all your UK agents to do so in writing.

VAT Deferment

The VAT Deferment Scheme allows businesses to defer payment of import VAT, customs duty, and excise duty for up to 45 days. To use this scheme, businesses typically need a deferment account and a financial guarantee (though some guarantees are waived under certain conditions). Key features:

• Requires HMRC approval and a deferment account
• May involve financial guarantees
• Useful for non-VAT registered importers, customs duty or excise duty (alcohol, tobacco etc.)

A VAT registered importer should not need a deferment account for customs duty and excise duty alone, if the amounts of duty are modest, they can use their freight agent’s deferment account.

For most VAT-registered businesses, PVA offers the most efficient route, but deferment remains valuable in specific scenarios.

To discuss this in further detail, please get in touch with one of our Indirect Tax Services team members.