Background
It has now been over 2 years since PIVA was introduced as a business-facilitation measure to help businesses cope with what otherwise could be significant cashflow problems when importing goods from EU suppliers in a post-Brexit world.
As a reminder, from 1 January 2021 businesses could account for import VAT via their VAT returns for goods imported into Great Britain on an import-by-import basis from anywhere outside the UK. Whilst PIVA has been a welcome addition to the statute books, various problems are still being experienced by both HMRC and importers alike as they have attempted to introduce and familiarise themselves with the new arrangements.
This article seeks to explain how PIVA works, highlight a number of common issues and problem areas and what can be done about them.
How does PIVA work?
In brief, businesses which are registered for VAT can account for import VAT via their VAT return on an import-by-import basis when:
- Goods are imported into the UK which are intended for business use;
- The importer’s VAT registration number is shown on the import declaration, and
- The Method of Payment Indicator , under the new CDS system (effective from 1 October 2022), is left blank at data field DE 4/8 and the importer’s VAT number included as the fiscal reference at field DE 3/40.
If PIVA is not selected in this way, then subject to the normal procedures, businesses can continue to use the deferment/C79 certification method and claim the import VAT payable during the clearance procedure as input tax.
The PIVA statement
Importers can view statements from HMRC which shows the total amount of VAT that has been postponed in the previous month. This VAT is reportable on the VAT return at Box 1 and Box 4 (in full if the business is entitled to full VAT recovery).
The PIVA statement should, in theory, be available during the first half of each month and it is recommended that each statement is downloaded and retained as access to it digitally is limited to 6 months.
To access the PIVA statement, the correct EORI number needs to be linked to an entity’s Unique Tax Reference (“UTR”) Government Gateway credentials to log-in.
Using an Import agent
A UK established business who engages the services of an agent to deal with customs declarations needs to advise the agent that it wants to use PIVA so the relevant parts on the customs declaration can be completed correctly.
Where a non-established taxable person (NETP) imports goods into the UK it is required to appoint an agent to deal with HMRC on its behalf, including the completion of customs declarations. The NETP should inform its agent that it wishes to use PIVA and that it is shown as the consignee on the declaration.
Problem areas
Import VAT recovery by non-owner of the goods
HMRC continue to maintain the position that import VAT can only be recovered by the owner of the goods. This has led to PIVA issues where commercial arrangements of a transaction dictates that it is the consignee (and not the title holder/owner of the goods) who has sought to recover the import VAT.
Whilst there has been a misconception that the PIVA regime avoids the need to consider the ‘importer of record’ or ownership point, this is not the case and output tax (to pay the import VAT liability) still needs to be accounted for and input tax recovery blocked where the consignee is not also the owner of the goods.
This issue has become a major issue for UK businesses especially where they are arranging to bring goods into the UK on behalf of a customer for repair or processing, or where importing goods under operating leases.
On potential solution for such scenarios would be to apply for Inward Processing Relief (“IPR”) which allows for the suspension of any import VAT until such a time as the goods enter free circulation within the UK (if ever).
Incorrect PIVA statements
Since inception, HMRC have experienced various technical ‘glitches’ when producing accurate PIVA statements. Typically, these issues have related to the import VAT figures on PIVA statements which have been downloaded early in the month being incorrect. This has mean that businesses have had to wait until HMRC have issued replacement PIVA statements before completing their VAT returns.
Adjusting for errors
Unlike recovering import VAT via the C79 certification procedure, it is not possible to adjust the PIVA statements. By way of example, any error in the correct party accounting for the import VAT could easily result in import VAT being recovered twice. Therefore, if a business accounted for import VAT on its VAT return and later finds out the amount has changed or is incorrect, it must either:
- Amend any £nil net tax errors on its next VAT return (where the import VAT adjustment in Box 1 will be equal to the input tax claim in Box 4); or
- Follow the formal Error Correction Notice procedures.
Top Tips
To ensure that import VAT is being correctly recovered, we would recommend the following:
- Cross-border supply chains are clearly documented for each party involved in the transaction, including the role of any third-party import agents/brokers.
- If moving to PVA, consider whether it is possible to reduce any deferment account guarantees can be reduced.
- PIVA statements are reconciled to ensure that the import VAT is recoverable by the business.
