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Simplified import VAT accounting – reduce costs and minimise cash flow impacts

27th September 2018

When goods are imported into the UK from outside the EU, import VAT and duty is normally payable. For regular importers, a system whereby VAT and duty charges can be deferred to the following month may be possible if authorised to use a duty deferment account or where using the deferment account of an authorised agent.

Import VAT may be recoverable if you are VAT registered, however, duty is a cost. There are also cash flow implications when paying and then recovering import VAT on the VAT return at a later date. The following may assist businesses in reducing cost and minimising the cash flow impact of importing goods into the UK.

What is simplified import VAT accounting?

Menzies microscope iconSimplified Import VAT Accounting (SIVA) enables a company or agent to operate a VAT and duty deferment account without a guarantee for the VAT element, therefore reducing the compliance cost to the business.

As with all applications for a reduced guarantee, competency must be demonstrated in procedures, processes and systems. For SIVA, the company must also have been VAT registered for three years and either be the holder of a live deferment account or intend to apply for one.

Approval criteria

Certain criteria must be met by the business to be approved for SIVA as follows:

  • It must have been registered and continuously trading for three years or more although businesses with less than three years may still be considered
  • It must not be in debt to HMRC on application and should have a clean debtor history
  • Applicants with serious offences on record with HMRC will be excluded
  • If already holding a deferment account, payment history for the past 12 months will be reviewed
  • It must have a good VAT compliance history with eligibility assessed against a number of compliance criteria
  • It must not have been in default in the last 12 months
  • Any Transfer of a Going Concern must have taken place more than three years prior to date of application
  • It must be able to prove financial solvency and undergo a liquidity risk assessment as part of the application
  • A high level of records management must be demonstrated
  • External credit checks will be undertaken where HMRC deem necessary

Application process

Application must be made using the SIVA application form (SIVA1) and accompanying questionnaire (SIVA1a). Once the application has been submitted, HMRC will issue either a decision letter within 120 days of application or an interim acknowledgement of application.

Agents

If you act as agent, SIVA can be applied for regardless of the capacity in which you act. An agent’s use of SIVA will not affect its liability for the customs debt, that is, indirect representatives will be jointly and severally liable with the principal and direct representatives will not be liable for the customs debt. Any payments made through the deferment account will be treated as a disbursement on behalf of the principal.

Once approved

On receipt of the SIVA approval letter, the level of bank guarantee required to operate the VAT and duty deferment account can be reviewed and the following points considered and addressed with the Central Deferment Office (CDO):

  • Level of future use of the deferment account regarding maximum import VAT, customs and/or excise duties deferred in a calendar month
  • How does the deferment account limit and guarantee level compare to the bank guarantee currently being provided

Remember that a 100% guarantee is still required for any customs and/or excise duties. Once the above has been considered, the CDO will require the following to be completed as necessary:

  • Deferment schedule – SIVA reduced security (SIVA2)
  • C1201 bank guarantee or C1201A amendment to C1201 guarantee
  • If a business does not already operate a deferment account, it must also submit an application to do so using form C1200

How we can help

Sean TurnerSince the application is quite lengthy and must be accompanied by a supplementary questionnaire where comprehensive information on procedures will be requested and potentially audited by HMRC, prior to SIVA being approved, we can assist with:

– Reviewing existing import and deferment processes
– Putting in place process documentation and reviewing and updating existing documentation
– Completing and/or reviewing the application
– Completing and/or reviewing the questionnaire.

Once approval for SIVA is given, we can assist with reviewing future import volumes and applying for or amending the guarantee. Should you wish to discuss SIVA further or any wider VAT accounting issues then please contact Sean Turner at Menzies LLP on sturner@menzies.co.uk or 0207 465 1908 .

Posted in Blog, Transport & logistics