VAT returns - getting it right

EU and non-EU

A GB-based business no longer makes EU acquisitions and dispatches of goods. Since Brexit there has been no difference between buying and selling goods with EU and non-EU suppliers. Goods arriving into GB are all classed as imports and subject to VAT when they arrive and those that leave the country are zero-rated exports.

Boxes 2, 8 and 9

The new procedures mean that there is no longer any acquisition tax to declare in Box 2 of your returns for EU purchases of goods. This box will always be zero. And because there is no longer any need to differentiate EU and non-EU sales and purchases, Boxes 8 and 9 are also zero. These boxes were previously used to separately disclose EU sales and purchases of goods.

Trap. The exception to this situation is for a business based in Northern Ireland, which is still part of the EU as far as goods are concerned. So, entries in these three boxes must still be considered.

Importing goods

If the business imports goods, you should have elected for postponed VAT accounting (PVA) on all arrivals following Brexit. An election is made for each shipment. This means that you don’t pay VAT to HMRC at the time of import. The VAT is deferred, and you declare it on the next return instead with a reverse charge entry. But are you completing the correct boxes?

Example. Carlos is VAT registered in GB and trades as a clothes shop. He imports all of his clothes for resale from France and has elected for PVA. The total value of his imports in January 2022 was £100,000, so he will make the following entries on his return that includes this month:

Box 1 - output tax - £20,000

Box 4 - input tax - £20,000

Box 7 - inputs - £100,000 - based on purchase invoices received from French suppliers.

Trap. If he used any of the clothes for non-business, private or exempt purposes, he would reduce the input tax figure in Box 4 in the same way that he would apportion input tax on a domestic purchase invoice. Tip. Make sure that EU suppliers do not charge foreign VAT on their sales of goods to the business. These sales will be zero-rated under EU law because they are exporting goods from an EU to a non-EU country. Ask them for a VAT credit if they do.

Exporting goods

If the company’s goods leave GB (apart from going to Northern Ireland) then it is making a zero-rated export of goods. There is no difference between EU and non-EU sales since 1 January 2021. So, you only make an entry in Box 6 of the return, to record it as a sale.

Tip. Don’t forget that Box 6 of your return includes all sales of goods and services, including those that are outside the scope of VAT, e.g. most services sold to non-UK customers. Trap. Make sure you keep proof of export for six years as part of your records, to support your zero-rating. Tip. Guidance is available here.