Can I use VAT cash accounting for China imports?
Yes, if eligible, your business can use VAT cash accounting while importing from China, including for onward sales. But imports are excluded: factory payment dates do not determine import VAT accounting or recovery. Handle import VAT separately through postponed accounting or paid-import evidence. Cambridge China Bridge helps coordinate sourcing paperwork.
Importing does not exclude your whole business
HMRC excludes imported goods from the Cash Accounting Scheme, but expressly allows the scheme for their onward supply. For sales within the scheme, you account for VAT in the period when you receive customer payment. That does not move the import VAT into the same period.
Ask your accountant to confirm eligibility and which transactions belong in the scheme before changing your bookkeeping. For the tax calculation and import VAT evidence, use our existing import VAT guide. This guide addresses the separate problem of payment-based accounting.
Keep factory payments separate from import VAT
For purchases covered by cash accounting, VAT recovery follows payment to the supplier. Imported goods are an exception. A deposit, balance payment or unpaid factory invoice does not determine when you account for or recover import VAT. Do not apply your ordinary cash-accounting purchase setting automatically to an imported goods invoice.
Keep the factory invoice, deposit and balance transfers together as the supplier payment record. Keep the customs declaration and import VAT evidence alongside them, with a shared shipment reference. Ask your accountant to check the software treatment before processing the shipment.
Choose the import VAT route before clearance
Ask HMRC or your accountant to confirm whether postponed VAT accounting is available to your business, how declaration and recovery would be handled on your VAT return, and which monthly statement you should use. Where import VAT is paid instead, ask what import VAT certificate or other evidence is needed for recovery. Neither route makes the factory payment date the import VAT trigger.
Tell the customs agent which route you intend to use and ask what evidence you will receive. Check the importer details rather than relying on a delivered quote. Our DDP import VAT guide explains why the import arrangement matters.
Give your accountant a shipment reconciliation
Prepare a shipment summary linking the factory invoice, payment history, customs entry and import VAT evidence. If a forwarder sends a combined bill, ask them to distinguish import VAT, duty and their own service charges. Highlight missing documents and ask your accountant to confirm that import VAT has not been claimed through both the supplier invoice and the import record.
When starting cash accounting, HMRC requires payments for transactions already accounted for under the normal method to be separated from scheme records. Flag outstanding invoices at the changeover. For a broader purchasing budget, see hidden importing costs.
Frequently asked questions
Can I use VAT cash accounting if I import from China?
Yes, if eligible. Your onward sales can use the scheme, but imported goods are excluded and import VAT must be handled separately.
Must I pay the Chinese factory before reclaiming import VAT?
The factory payment date does not control import VAT recovery under cash accounting. Recovery depends on the import VAT rules, your entitlement and the supporting import evidence.
Is postponed VAT accounting the same as cash accounting?
No. Ask HMRC or your accountant to confirm how postponed accounting would handle import VAT on your VAT return. Cash accounting uses payments to determine VAT timing for transactions covered by that scheme.
What should I send my accountant for a China shipment?
Send the factory invoice, deposit and balance payment records, customs declaration and postponed statement or import VAT certificate. Use a shared shipment reference and flag missing evidence.