Accounting changes for users of the Flat Rate Scheme

Changes to Accounting for VAT on Imports for Users of the Flat Rate Scheme

There are important changes from 1 June 2022 for small businesses using the Flat Rate Scheme who are importing goods and using postponed VAT accounting.

Those businesses using the Flat Rate Scheme must currently add the value of imported goods to the total of all their supplies before they carry out the Scheme calculation.

For VAT return periods starting on or after 1 June 2022, they should no longer include the value of imported goods in their flat rate turnover.  Instead the VAT due when using postponed VAT accounting should be added to box 1 of the return after completing the Flat Rate Scheme calculation.  There is no corresponding Input Tax credit for the Import VAT in Box 4 of the return, unless it is a capital item costing £2,000 or more, so it is important to check whether the Flat Rate Scheme is still worth using, particularly if any significant level of imports are being made.

HMRC have issued the following updated guidance:

Complete your VAT Return to account for import VAT – GOV.UK (www.gov.uk)

Importers not using the VAT Flat Rate Scheme

HMRC have also updated their guidance for VAT registered importers not using the Flat Rate Scheme:-

Complete your VAT Return to account for import VAT – GOV.UK (www.gov.uk)

These traders must account for postponed import VAT on their VAT returns for the accounting period which covers the date they imported the goods. The normal rules apply for what VAT can be reclaimed as input tax and the trader’s monthly statement will contain the information to support their claim.

HMRC is aware of the problems some importers are having when trying to access their monthly VAT statements. If you cannot access your statement or you’re having problems when viewing your statement, you should follow the guidance on how to complete a VAT Return if you’re having problems with your monthly statements.

As long as you take reasonable care to follow the guidance, there will be no penalty for errors.

For more information on this, please contact Alan Rolfe on 023 8046 1235.