Businesses may have to apply both acquisition and import VAT on transactions spanning Brexit transition period

HM Revenue & Customs (HMRC) has confirmed that both acquisition VAT and import VAT may apply on transactions spanning the end of the Brexit transition period.

The guidance has been published as part of a new practice note outlining the VAT treatment of transactions or movements of goods before and after 01 January 2021.

According to the regulator, any goods arriving into Great Britain on or after the end of the transition period from an EU member state will be subject to UK customs procedures and import duties, such as import VAT, in the same way as goods imported from the rest of the world.

However, if the movement of goods from the EU to Great Britain started before the end of the transition period, but the goods arrived in Great Britain after the transition period, that transaction will be an “acquisition” and “acquisition VAT should be accounted for where applicable”.

But if a business accounted for VAT on the acquisition of goods before the end of the transition period, but the goods did not begin movement until after the end the transition period, those goods “could be subject to both acquisition VAT and import VAT”.

HMRC advised that businesses in this predicament should account for import VAT on their return using the postponed accounting scheme, thereby reducing the amount of import VAT by the amount of acquisition VAT for which they are liable.

Businesses not eligible for postponed accounting, meanwhile, can deduct the import VAT as input tax on their VAT return.

Click here to read the guidance in full.

For help and advice, contact our expert team today.

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