A number of clients have asked me about using Postponed VAT Accounting (PVA) recently, so I thought I'd offer you some more information about it. If you are doing your bookkeeping in Xero and have a need to account for PVA on a transaction, you can follow these steps ...
Firstly to process postponed VAT, add a Domestic Reverse Charge expense tax rate in Xero. You can call it PVA or something similar. Transactions you apply the rate to are included in Box 1 and Box 4 of your VAT return.
To record the tax-exclusive amount of imported goods, create a bill with a zero-rated tax rate. The amount is included in Box 7 of your VAT return. Then, you can record the PVA amount as shown on your MPIVS, so create another bill with two line items:
- On the first line, add the PVA amount and use your new PVA tax rate
- On the second line, reverse the PVA amount by adding a negative line item. Use a zero-rated tax rate
In addition, the PVA adjustment feature can be used on your VAT return. The adjustment is automatically applied to Box 1 and Box 4 of the return, so you don't need to create a separate transaction for the PVA amount in Xero.
You can find your monthly Postponed VAT Accounting total in the Monthly Postponed Import VAT Statement (MPIVS) you receive from HMRC.
If anything I've written here resonates with you, call me on 01604 420057 and let's see how we can help you.