Importing and exporting goods from 1 January 2021
On 14 September 2020, HMRC issued a letter and supplementary guidance to all VAT registered organisations that import or export goods. This letter and guidance can be found at the following links:
The UK leaves the EU’s Single Market and Customs Union when the transitional period ends on 31 December 2020. The processes for declaring imports and exports, and the means of paying import VAT, will change from 1 January 2021. This affects any NHS organisation that receives goods from outside the UK or supplies goods to another country.
As the NHS commonly imports, rather than exports, goods, this article will address the changes that impact on imports. The changes affect goods purchased both from the EU and non-EU countries.
As we have previously reported, it is essential that the following initial steps are taken, if they have not been actioned yet:
1. Ensure you have an EORI number. This is an Economic Operator Registration Identification Number. This number is easily obtainable from HMRC and guidance can be found here.
2. Decide how you are going to make import and export declarations. From 1 January 2021, both goods arriving from inside and outside the EU will need to be declared for Customs purposes. Most goods will qualify to be declared to HMRC using a supplementary declaration that can be deferred for up to six months. We strongly recommend appointing an agent to make these declarations as they have the expertise and automated processes in place to make timely declarations to HMRC. HMRC’s guidance can be found here.
Imports from 1 January 2021
From 1 January 2021, new procedures will apply to the majority of goods being imported into the UK.
All goods acquired from another country (EU and non-EU) will be subject to Import VAT.
Import VAT will no longer be paid at the point of import. You will need to declare Import VAT in Box 1 of your VAT return in the month that the import is made. This is called Postponed VAT Accounting.
Because of the COS VAT rules, the NHS will not normally be entitled to reclaim Import VAT unless the purchase is directly attributable to a taxable business activity. If you are entitled to reclaim the Import VAT, an entry is made in Box 4 of your VAT return.
Details of the goods being imported must be declared to HMRC. However, for the period from 1 January to 30 June 2021, you or your agent can defer submitting a supplementary import declaration for up to six months. You must keep detailed records of imports for this period.
Import duties may be payable as well as VAT. Duties cannot be accounted for on a VAT return but can be paid monthly by direct debit via a duty deferment account. It is possible that your agent has their own deferment account, but they may ask you to get your own from HMRC. A supplementary import declaration cannot be submitted without having a duty deferment account held either by your agent or yourself.
Amongst other items, controlled goods include specific drugs and precursor drug chemicals that are subject to licencing. With the exception of drugs, controlled goods must be reported on a full customs declaration. The import of licenced drugs can be reported on a simplified frontier declaration, but this is in addition to the supplementary declaration referred to above.
Imports from 1 July 2021
From July 2021, organisations moving any goods to or from the UK will have to make full customs declarations at the point of importation and pay relevant tariffs. Full Safety and Security declarations will also be required.
As these procedures will be new and time-consuming to many, this is another reason to consider appointing an agent to deal with the necessary reporting on your behalf. If you fail to act now, this may result in delays in receiving critical medical equipment and other supplies from overseas.
If you have any concerns regarding these new procedures or would like more information, please contact your Liaison Financial VAT advisor.
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