HMRC direction on changes to import VAT from 2021

Import VAT

August 27, 2020

A question post Brexit has been in minds of all those who import goods from outside UK. The Transition period ends on 1 January 2021 and from then new VAT rules will be applicable on import. What changes will be there on import VAT from 2021?

There will be certain major changes

  •  We charge Zero VAT to a registered EU business. That will now be considered import.


No Distance Selling thresholds

  • EU e-commerce sellers need to register for UK VAT if they have been selling to UK consumers under the £70,000 threshold. UK sellers will have to register for VAT in Europe.


Postponed Accounting import VAT

The UK will introduce a Postponed Accounting import VAT deferral scheme. This means cash VAT payment does not have to be made by business importers to UK customs. (However, the same is not offered by many EU countries for UK businesses importing their goods.)


Digital services

  • - The UK will no longer be a member of the EU Mini One-Stop-Shop single VAT return scheme.
  • - This means UK sellers of electronic, broadcast or telecoms services (UK sellers of digital services to EU consumers) will have to register in any other EU state, as a non-Union business.
  • - EU sellers into the UK will have to register with the UK’s HMRC for the same declaration.
  • - Thus, non-EU business which used the UK MOSS registration will have to reregister for MOSS in the EU and separately in the UK under a regular VAT return.


EU VAT on travel / hotel

  • Certain UK businesses incurring EU VAT on travel, hotel or other expenses will have to use the 13th Directive paper-based reclaim process instead of 8th Directive online VAT reclaim system operated via HMRC. This means an individual claim to each country.


Northern Ireland

  • - Northern Ireland will take-up a dual position
  • - Northern Ireland will enter into a special VAT and customs relationship with the EU. While still a part of UK, Northern Ireland will follow some EU rules it will still charge Zero VAT to businesses across the Irish border. UK authorities will collect EU VAT on imports into Ireland via Northern Ireland. 


For goods under £ 135

  • - The tax point for VAT payment will be the point of sale and not the point of import
  • - Overseas supplier without online marketplace involvement will have to register for VAT and account to HMRC.
  • - Online marketplace facilitating Overseas supplier will have to register for VAT and account to HMRC and not the overseas supplier in such case.
  • - For goods at £135 or below, sellers or their postal service will have to declare and pay to HMRC via a new, quarterly filing
  • - Cancellations of low-value consignment stock relief; low value import goods are not exempt anymore.


Postponed accounting

  • - For businesses registered for VAT in the UK, it will be possible to account for import VAT on VAT returns for goods imported from anywhere in the world.
  • - You will be declaring and recovering import VAT on the same VAT return, (rather than having to pay it upfront and recover it later).
  • - Compared to the current rules for imports from outside of the EU it is simpler and advantageous in terms of cash flow.


Postponed accounting can be used to account for import VAT if :-

  • - The goods are imported for use in a business.
  • - The business’s EORI number which starts GB is included on the customs declaration.
  • - The business’s VAT registration number is shown on the customs declaration where needed.


HMRC VAT return

  • - It will be necessary to account for import VAT on the next VAT return if you have imported goods.
  • - An online monthly statement will be available to download and keep, which will show the total import VAT postponed for the previous month that should be included on the VAT return.
  • - Due to postponed accounting there will be changes to how the VAT return should be completed.
  •  Box 1 should include the VAT due in the period on imports accounted for through postponed VAT accounting.
  •  Box 4 should include the VAT reclaimed in the period on imports accounted for through postponed VAT accounting.
  •  Box 7 should include the total value of all imports of goods included on the online monthly statement, excluding any VAT.