The Chartered Institute of Taxation (CIOT) welcomes today’s Budget announcement that the government will introduce a new way for importers to account for import VAT from 1 January 2021.
Known as ‘postponed accounting’, UK importers who are registered for VAT will account for import VAT as an entry in the VAT return, rather than paying it at the time of import or by using a monthly deferral account. This will represent a significant cashflow easement to importers as the declaration and recovery of VAT will become an administrative accounting procedure wholly within the VAT return. The obligation to pay customs or excise duty at the time of import is unaffected by postponed accounting, as these are separate taxes.
Alan McLintock, Chair of CIOT’s Indirect Taxes Committee, said:
“This is excellent news for all importers, large and small. Postponed accounting will help cut the cash flow impact of having significant amounts of cash tied up due to the delay between the payment of import VAT and the associated later recovery through the importer’s UK VAT return.
“Even though the expectation is that the UK will leave the EU with a negotiated deal, this announcement will put many businesses minds at rest and there will be one less thing to worry about next year.”
A number of other significant indirect taxes announcements were made in today’s Budget.
From 1 December 2020, VAT will be removed from digital publications, making it clear that they are entitled to the same VAT treatment as their physical counterparts, recognising that the tax system must continually evolve to keep up with technological developments. In addition, following a long campaign in the UK, the VAT on women’s sanitary products (known colloquially as the ‘tampon tax’) will be removed from 1 January 2021.
Alan McLintock added:
“Whilst these particular developments are welcome, they should not trigger a proliferation of changes to the VAT system simply because we have additional flexibility with being outside the EU.
“Indeed, the government should follow its own consultation framework; the engagement by government with stakeholders on the new Plastic Packaging Tax, and upon which further consultation has been launched today, is an appropriate example.”
Notes for editors
1. These measures appear in the following Budget documents:
Postponed accounting: Paragraph 2.234 on page 95 of the Red Book
Digital publications: Paragraph 2.233 on page 95 of the Red Book
Tampon tax: Paragraph 2.235 on page 95 of the Red Book
Plastic Packaging Tax: Paragraph 2.214 on page 93 of the Red Book
Plastic Packaging Tax consultation: https://www.gov.uk/government/consultations/plastic-packaging-tax
2. The Chartered Institute of Taxation (CIOT)
The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.
The CIOT draws on our members’ experience in private practice, commerce and industry, government and academia to improve tax administration and propose and explain how tax policy objectives can most effectively be achieved. We also link to, and draw on, similar leading professional tax bodies in other countries. The CIOT’s comments and recommendations on tax issues are made in line with our charitable objectives: we are politically neutral in our work.
The CIOT’s 19,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.
Contact: Hamant Verma, External Relations Officer, 0207 340 2702 HVerma@ciot.org.uk.
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