What Is Import VAT and How Does It Work?
Import VAT is charged on goods entering the UK. Learn how it works, how to reclaim it, and the postponed VAT accounting option.
Key Takeaways
- Import VAT is charged at 20% on the CIF value of goods plus import duty
- VAT-registered businesses can reclaim import VAT on their VAT return
- Postponed VAT Accounting (PVA) defers the VAT payment until the VAT return
- PVA improves cash flow and is available to all UK VAT-registered importers
What import VAT is
When goods are imported into the UK, import VAT is charged at the point of customs clearance at 20%. It is calculated on the CIF value of the goods (transaction value plus insurance and freight) plus the import duty payable. VAT-registered businesses can reclaim it; non-VAT-registered businesses cannot.
The calculation
Example: goods purchased at £10,000, freight £500, insurance £50, CIF value = £10,550. Import duty at 5% = £527.50. Duty-inclusive value = £11,077.50. Import VAT at 20% = £2,215.50. Total payable at customs: £2,743. For a VAT-registered business, the £2,215.50 VAT is reclaimable.
Postponed VAT Accounting
Since January 2021, UK VAT-registered importers can use Postponed VAT Accounting (PVA). Under PVA, import VAT is not paid at the border — it is accounted for on the VAT return as both a payment and a reclaim in the same period, netting to zero cash impact. PVA is the right choice for almost all VAT-registered importers.
The Monthly Import VAT Statement
To use PVA, access your Monthly Import VAT Statement (MPIVS) from the CDS (Customs Declaration Service) online portal. This summarises all your import VAT for the month and is the document you use to make the PVA accounting entries on your VAT return.
Non-VAT registered businesses
If your business is below the VAT registration threshold (currently £90,000 turnover) or otherwise not VAT-registered, you cannot reclaim import VAT — it is a cash cost on every import. This affects your landed cost calculation significantly and is often an economic argument for voluntary VAT registration.