What is the Difference between Postponed VAT Accounting and Reverse Charge?
Table Of Contents
Overview
When purchasing goods or services from outside the UK, you may encounter either Postponed VAT Accounting (PVA) or Reverse Charge VAT.
Although both methods affect how VAT is reported, they apply to different types of purchases and are treated differently depending on whether you are importing goods or purchasing services.
This article explains the difference between the two methods and how they affect your VAT Return.
Postponed VAT Accounting (PVA)
What is Postponed VAT Accounting?
Postponed VAT Accounting allows VAT-registered businesses importing goods into the UK to account for import VAT on their VAT Return rather than paying the VAT at the point of entry.
This applies to imports from:
- EU countries
- Non-EU countries (Rest of World)
Using PVA can help improve cash flow because you do not need to pay import VAT upfront and then reclaim it later.
For more information, see:
- HMRC Guidance - Complete your VAT Return to account for import VAT
- HMRC Guidance - Check when you can account for import VAT on your VAT Return
Postponed VAT Statements
HMRC provides a monthly Postponed Import VAT Statement showing the VAT that has been postponed for the previous month.
You can download these statements directly from HMRC.
For more information, see:
How PVA Appears on the VAT Return
The postponed VAT amount is:
- Added to the VAT due to HMRC.
- Added to the VAT reclaimable from HMRC.
As both values are recorded on the same VAT Return, there is normally no overall VAT cost, assuming the VAT is fully recoverable.
Example
If the postponed import VAT is:
£100
The VAT Return will show:
| Entry | Amount |
|---|---|
| VAT Due | £100 |
| VAT Reclaimable | £100 |
The result is:
No additional VAT to pay
No additional VAT to reclaim
Reverse Charge VAT
What is Reverse Charge VAT?
The Reverse Charge applies to services purchased from suppliers based outside the UK.
Unlike Postponed VAT Accounting, which applies to goods, the Reverse Charge is specifically used for services received from overseas suppliers.
Examples may include:
- Software subscriptions
- Consultancy services
- Marketing services
- Other business services supplied from outside the UK
Note: If your business is not VAT registered, the Reverse Charge does not apply.
For more information, see:
How Reverse Charge VAT Works
The Reverse Charge requires you to calculate the VAT that would have been charged if the service had been supplied by a UK business.
This amount is then:
- Added to the VAT you owe HMRC.
- Added to the VAT you can reclaim.
As with PVA, this normally has a neutral effect on the overall VAT position if the VAT is fully recoverable.
Example
If the VAT that would have been charged is:
£100
The VAT Return will show:
| Entry | Amount |
|---|---|
| VAT Due | £100 |
| VAT Reclaimable | £100 |
The result is:
No additional VAT to pay
No additional VAT to reclaim
Postponed VAT Accounting vs Reverse Charge
| Feature | Postponed VAT Accounting (PVA) | Reverse Charge |
|---|---|---|
| Applies To | Goods imported into the UK | Services purchased from overseas suppliers |
| VAT Registration Required | Yes | Yes |
| VAT Paid at Border | No | Not applicable |
| Appears as VAT Due | Yes | Yes |
| Appears as VAT Reclaimable | Yes | Yes |
| Usually VAT Neutral | Yes | Yes |
| HMRC Statement Available | Yes | No |
Summary
- Postponed VAT Accounting (PVA) applies to goods imported into the UK.
- Reverse Charge VAT applies to services purchased from overseas suppliers.
- Both methods record VAT as both payable and reclaimable on the VAT Return.
- In most cases, this results in no additional VAT being payable or reclaimable, provided the VAT is fully recoverable.
- HMRC provides monthly statements for Postponed VAT Accounting, but not for Reverse Charge transactions.
For detailed guidance on either process, refer to the relevant HMRC documentation linked throughout this article.