For many ecommerce sellers, understanding how VAT works on imports has become increasingly complex, especially when it involves international transactions. Two terms that frequently emerge in discussions about VAT compliance on imports are “deferred VAT” and “postponed VAT.” Each approach affects cash flow and how you handle your import VAT accounting, so choosing the right one matters if you want clean records and predictable VAT bills.
What is Import VAT in the UK?
Import VAT is a tax applied to goods brought into the UK from abroad. It is charged as a percentage of the total value of the imported goods, including costs such as shipping and insurance. It is calculated using the customs value declared on the import declaration at the point the goods arrive. This forms the basis for the total import VAT due.
For consignments above £135, import VAT is charged at the border unless you use Postponed VAT Accounting. For consignments of £135 or less sold to UK customers (typically in a dropshipping model), VAT is usually collected at the point of sale by the seller or marketplace, so it does not arise as import VAT on entry.
Accurate import VAT accounting depends on keeping the documents linked to each import, including the customs declaration and any monthly import VAT statement available through your Government Gateway account.
What is Postponed Import VAT?
Postponed VAT allows businesses to account for import VAT on their VAT return, rather than paying it upfront at the time of import. This mechanism is particularly beneficial for cash flow, as it enables businesses to postpone the point at which import VAT is payable when they file their VAT return.
At this point, the business can then also reclaim the import VAT on their VAT return, meaning that the import VAT never has to leave the bank.
To use postponed VAT, a UK VAT registered business must:
- Have an EORI number
- Ensure the business is listed as the importer on record
- Request postponed VAT treatment from the freight agent
- Provide the business VAT number and EORI
- Access and download each postponed import VAT statement from the Government Gateway
- Include the figures from the statement on the next UK VAT return
- Include the information from your postponed VAT statements on your UK VAT returns.
The monthly statement is the official evidence of the import VAT due. It replaces the need to pay import VAT at the border because the VAT is declared and reclaimed on the same return, providing a neutral cash flow position for most ecommerce sellers.
What is Deferred Import VAT?
Deferred Import VAT arrangements permit businesses to delay the payment of both import VAT and duty until the 15th of the following month, rather than paying it immediately upon the arrival of goods into the country. This method can ease cash flow pressures by providing a window between importing goods and the VAT payment deadline, but it also helps ensure a smooth flow of goods through customs as they won’t be delayed by any payment issues. It’s particularly relevant for businesses with significant import activities, as it helps manage financial resources more efficiently by aligning VAT payments more closely with the business’s cash flow cycles.
Key Differences Between Postponed and Deferred Import VAT
The main difference is how the VAT is settled:
- Postponed VAT shifts import VAT to the VAT return, avoiding any upfront payment.
- Deferred VAT delays the physical payment, but it is still paid before the next VAT return period.
Postponed VAT is simple and practical for even the smallest of e-commerce businesses. Meanwhile, a deferred import VAT is a more lengthy and costly process to arrange. As a UK business, you may be able to apply for a guarantee waiver, but for non-UK based businesses, you must provide a guarantee to HMRC.
Postponed VAT also removes the need for cash to leave the bank, so it is often preferred by ecommerce sellers who want predictable cash flow and straightforward import VAT accounting. Deferred VAT can be useful for larger importers or those with complex logistics arrangements. For the majority of small or medium-sized e-commerce businesses, postponed VAT is likely to be the more practical option.
Navigating VAT Compliance in the UK
A UK VAT registered business must make sure that its VAT returns match the data held by HMRC. This includes reconciling postponed VAT statements, deferment statements and import records. Clean reporting helps prevent errors that could trigger HMRC queries.
Many online sellers get support from accountants specialized in e-commerce to keep reporting accurate and ensure that the business adheres to the current tax laws while benefits from the most advantageous VAT treatment.
Regulatory Updates and Future Outlook
VAT rules are updated regularly, particularly around cross-border ecommerce. Keeping an eye on changes helps prevent errors with import VAT, platform reporting or fulfilment arrangements. As your business scales and stock begins moving through multiple countries, your VAT setup may need a review to ensure it still fits your model.
Several changes introduced during 2025 have influenced how ecommerce importers manage VAT compliance. These updates continue to shape import VAT accounting as we move into 2026 and further changes will be phased over in the coming years.
Changes introduced for low-value imports
As of December 2025 the £135 customs-duty relief for low-value consignments remains in place, but the government has announced it will be removed with full implementation no later than March 2029. The potential shift in how low-value consignments are handled will lead many ecommerce sellers to reassess pricing and fulfilment models beyond 2026.
Updates to Postponed VAT Accounting (PVA) guidance
- HMRC refreshed its PVA guidance in mid-2025, clarifying expectations for how import VAT should be declared and reclaimed.
- PVA continues to be available to all UK VAT registered businesses, with HMRC reinforcing the need for accurate reconciliation across postponed import VAT statements, VAT returns and customs declarations.
- The 2025 updates placed more focus on consistent record-keeping to support the figures entered on each VAT return.
Legal basis for postponed import VAT accounting
Postponed accounting remains grounded in UK VAT legislation established after the UK left the EU. Throughout 2025, it continued to be the preferred method for most importers because it avoids the need to pay import VAT at the border.
Compliance risk and increased scrutiny
HMRC increased its scrutiny of import VAT claims during 2025, focusing on documentation and evidence of ownership at the point of import. Clear records, including customs declaration data and postponed import VAT statements, are now expected as standard when supporting VAT recovery. Businesses have faced closer attention where declarations, statements and VAT returns do not align.
What this means for growing ecommerce businesses
- Shifts in low-value import treatment may alter cost structures for high-volume, low-ticket sellers.
- The 2025 PVA guidance updates highlight the need for tighter reconciliation and timely record-keeping.
- Increased scrutiny around documentation means import VAT accounting processes may need strengthening as stock volumes rise.
- Periodic reviews help ensure your VAT processes remain aligned with current VAT legislation and support smooth import operations going into 2026.
Working with an accountant experienced in cross-border ecommerce VAT, someone familiar with recent legislative changes and compliance expectations ensures your business remains compliant and efficient.
For personalised advice and solutions book a call with our E-Commerce VAT accountants at Elver.