How to Use Simplified Import VAT Accounting (SIVA)

When your international business imports goods into the UK they will usually have VAT charged on them. However, goods that have a market value of less than £18 won’t normally have any VAT applied to them when they enter the UK.

The payment of VAT on each consignment can quickly become difficult to track with the accounts your business must keep and the payments themselves becoming a burden on your business’s cashflow.

To help your business more efficiently manage its imports, you can delay or defer any payments of VAT that are due on the goods you are brining into the UK. As a regular importer, if you do want to defer your payments of VAT, you must set up a financial guarantee against the VAT your business owes to cover the period your payments will be deferred.

You can reduce the level of this guarantee by requesting authorisation from HM Customs & Excise (HMRC) and by setting up a system within your business called Simplified Import VAT Accounting (SIVA). Note that you can only use the SIVA system for VAT on imports. All other taxes such as excise duty must be paid in the usual way.

How to Obtain SIVA Approval

Your business has to make a formal application to HMRC to set up and operate the SIVA system. Your business must meet specific criteria that include:

• Your business must not be in administration or other financial difficulty
• A current duty deferment account must already exist and have been operating for at least the last 12 months
• Your business must have a VAT number and have VAT status for the last three years
• If your business has any serious offences against it, your SIVA application will be declined
• Your current VAT payment record should be excellent

Your business can apply to start operating s SIVA system by completing form SIVA 1 that you can obtain from HMRC. Once you have completed your form, a decision should be made by HMRC within 30 days. If the HMRC approves your application you will receive a letter and details of the deferments you can apply to your imports. Your SIVA information pack will contain:

• The details of your SIVA approval and any conditions your business must meet
• Details about how your new SIVA status will impact on your existing deferment of VAT
• The level of deferment that has been set
• The C1201 form
• The C1201A form

Your first task will be to complete forms C1201 and C1201A as soon as you can and return them. Your deferment account will then be updated to show the level of deferment that has been granted. Remember that you must continue to pay any VAT that is due on any imported goods while you are setting up for SIVA system.

Your next task is to calculate the new level of finance guarantee you now need to have in place when your SIVA system comes into operation. Your SIVA information pack will have details (the deferment schedule) that can help you arrive at the right figure. Also, your business must keep meeting the conditions of its SIVA approval to continue using the system. If after you have made your deferment calculations you decide not to proceed with the SIVA system, you must return the letter you got from HMRC with an explanatory note about why you don’t want to continue.