Postponed accounting in Ireland: import VAT without the cash hit

Revenue says postponed accounting is available to all traders registered for VAT and for Customs and Excise, and that it is optional. Traders must meet certain conditions and be able to show Revenue that they comply when asked. If you import goods but are not registered for Customs and Excise, sort that out first.

Without postponed accounting, import VAT is paid when the goods are released, and reclaimed weeks later on the VAT return. With it, the VAT is declared on the VAT3 for the period of import and, where you are entitled to deduct it, claimed back on the same return. The two entries usually cancel, so no payment is needed at import.

Each import needs two VAT entries in the books: the import VAT due and the matching deduction. The goods themselves are recorded at their cost, with customs duty, if any, as part of that cost. Freight and broker fees for bringing the goods in usually belong in the cost too, which matters when you work out the margin on each product line. Keep the import documents with the transaction, because they are your evidence for both the VAT and the duty.

Partly exempt businesses, such as those making some VAT-exempt supplies alongside taxable ones, cannot always reclaim all the VAT, so the deduction may be smaller than the VAT due. Your accountant can confirm the right proportion.

These are the errors that most often appear when importers first use postponed accounting.

• Recording the goods but not the import VAT, so the return understates both sides.
• Recording the VAT as paid to a supplier when it was postponed.
• Losing the customs paperwork that supports the entries.
• Mixing up imports from Britain with purchases from Northern Ireland, which can be treated differently for goods.

Since Brexit, goods from Great Britain are imports, which is why postponed accounting matters so much to Irish businesses buying from British suppliers. Courier and marketplace purchases can carry import VAT and fees on top of the invoice price, so check how each supplier ships and who handles customs.

An Irish retailer imports stock worth €20,000 from a British supplier. Without postponed accounting, import VAT on that value would be paid when the goods were released, and the retailer would wait until its next VAT return to reclaim it.

With postponed accounting, the retailer declares the import VAT on its VAT3 for the period of import and, being fully entitled, deducts the same amount on the same return. Its cash stays in the business for stock and wages rather than sitting with Revenue for weeks.

Before each return, list the imports in the period from your customs paperwork and confirm each has matching VAT entries in the books. A quick reconciliation between customs records and the ledger catches the commonest error, an import with no VAT entries at all, before it reaches Revenue.

The benefit grows with the size and frequency of imports. A business importing every month and reclaiming import VAT only when each two-month return is processed can have a large sum tied up with Revenue at any time. Postponed accounting removes that gap entirely for VAT-registered importers who are entitled to full deduction.

HelloBooks records foreign-currency purchases at the rate on the day, keeps documents attached to each transaction, and applies tax codes line by line so import VAT entries can be recorded on both sides. Review import entries yourself each period. Intra-EU and import-specific VAT3 boxes should be checked carefully with your accountant.