Tag Archives: HMRC-VAT

New VAT penalties and interest charges

By   18 May 2022
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Further to my article explaining the changes to late returns and payment penalties, HMRC has now published further guidance on new regime.

These changes, originally intended to be introduced on I April 2022 have been delayed until 1 January 2023 (for VAT periods starting on, or after, this date).

From 1 January 2023, HMRC will charge late-payment interest from the day a VAT payment is overdue to the day the VAT is paid, calculated at the Bank of England base rate plus 2.5%.

Period of familiarisation

HMRC say that to give businesses time to get used to the changes, it will not be charging a first late payment penalty for the first year from 1 January 2023 until 31 December 2023, if the tax is paid in full within 30 days of the payment due date.

More on late returns here and on late payments here.

New Form 64-8 agent authorisation

By   29 March 2022
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New 64-8 agent authorisation form

HMRC has issued a notice which states that, from 31 March 2022, businesses taking on new clients will need them to complete a new form 64-8 to give authorisation for them to deal with HMRC on their client’s behalf.

Existing clients do not need to re-authorise their current relationship.

Access

The new form will be available from 31 March 2022 and may be downloaded by searching for “Tax agents and advisers; authorising your agent” on GOV.UK. There is no direct link yet.

The new form is said to improve data protection and allows taxpayers to state which tax regime they want you to access. The form also includes new guidance for taxpayers and what data they are agreeing to share with their agent.

Making Tax Digital for VAT – extra revenue calculated

By   21 March 2022
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HMRC has published research which evaluates the impact of the introduction of Making Tax Digital (MTD) for VAT.

The report sets out that an additional circa £185 million of tax has been collected, according to its data. This is compared to the original estimate which was that an additional amount of £115 million of VAT would be received by the department.

For businesses above the registration threshold, the estimated additional tax revenue due to MTD is an average of £57 per business. This represents a 0.9% increase from the average amount estimated had the businesses not used MTD. HMRC says that this research provides “strong evidence that Making Tax Digital is achieving its objective of reducing the tax gap by reducing the amount of errors made when filing tax returns”.

MTD background

MTD aims to reduce the tax gap by helping businesses pay the right amount of tax. The tax gap is the difference between the theoretical amount of tax that should be paid and the actual tax receipts. The difference is caused by several reasons including avoidance, evasion, and calculation errors or failure to take reasonable care when filing returns.

MTD is intended to tackle the part of the tax gap which is caused by error and failure to take reasonable care. Businesses are required to keep records in digital form and file their VAT returns using software that directly extracts information from these digital records. This should improve accuracy and remove opportunities to make certain types of mistakes in preparing and submitting tax returns, particularly arithmetical and transposition errors.

Downside

All is not sweetness and light though. HMRC has been slammed by The House of Lords Economic Affairs Committee which published a report that said that MTD for VAT cost far more than was predicted in HMRC’s impact assessments. The Committee also criticised HMRC, saying it “inadequately considered the needs and concerns of smaller businesses” and that HMRC has neglected its duty to support small businesses through the implementation of the controversial measures, suggesting it “will make life even more difficult” for them. In addition, the Committee said it “remained unconvinced” of the government’s logic used to justify the speed and rigidity with which the programme was being introduced.

VAT: HMRC – Customs changes from 1 January and 1 July 2022

By   6 December 2021
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Further to my article on new procedures, HMRC has issued a reminder of customs changes that come into effect on 1 January 2022.

It is now less than a month until full controls are introduced.

The Changes

  • Customs declarations

Businesses will no longer be able to delay making import customs declarations under the Staged Customs Controls Most importers will have to make declarations and pay relevant tariffs at the point of import.

  • Border controls

Ports and other border locations will be required to control goods moving Great Britain and the EU. This means that unless goods have a valid declaration and have received customs clearance, they will not be able to be released into circulation, and in most cases will not be able to leave the port. From 1 January 2022, goods may be directed to an Inland Border Facility for documentary or physical checks if these checks cannot be done at the border.

  • Rules of origin for imports and exports

The UK’s deal called the Trade and Cooperation Agreement (TCA), means that the goods imported or exported may benefit from a reduced rate of Customs Duty (tariff preference). To use this a business will need proof that goods which are:

. imported from the EU originate there

. exported to the EU originate in the UK

  • Commodity codes

Commodity codes are used worldwide to classify goods that are imported and exported. They are standardised up to six digits and reviewed by the World Customs Organisation every five years. Following the end of the latest review, the UK codes will be changing on 1 January 2022. HMRC guidance is available on finding commodity codes for imports into or exports out of the UK which includes information on using the ‘Trade Tariff Tool’ to find the correct commodity codes.

  • Postponed VAT Accounting

A VAT registered importer is able to continue to use Postponed VAT Accounting (PVA) on all customs declarations that are liable to import VAT (including supplementary declarations).

Further changes from 1 July 2022

The following changes will be introduced from July 2022:

  • requirements for full safety and security declarations for all imports
  • new requirements for Export Health Certificates
  • requirements for Phytosanitary Certificates
  • physical checks on sanitary and phytosanitary goods at Border Control Posts

Businesses must be prepared for these changes and I recommend that an experienced representative is used.

VAT: Trading with the EU. Changes from 1 January 2022

By   23 November 2021
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From 1 January 2022 the rules for selling to, and buying from, the EU will change.

HMRC have issued information about these changes.

Broadly, from 1‌‌ ‌January‌‌ ‌2022, businesses will no longer be able to delay making import customs declarations under the Staged Customs Controls rules that have applied during 2021. Most businesses will have to make declarations and pay relevant tariffs at the point of import. However, see details of Postponed Accounting.

Please also see a publication issued by the Cabinet Office which includes a Policy Paper on The Border Operating Model.

VAT: HMRC to end making payable orders to NETPs

By   9 November 2021
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HMRC will stop issuing payable orders to overseas non-established taxpayers (NETP – taxpayers who are registered for UK VAT but do not have a business address here). The system automatically issued a payable order if a NETP was due a repayment.

Background

HMRC has received notifications and complaints from taxpayers advising that they can no longer cash their payable orders in their country or their bank. The impact of Brexit and COVID19 has seen an increase in banks/countries no longer accepting payable orders. Consequently, HMRC were sending repayments to NETPs with the knowledge they may not be able to cash them.

New Gform

To address this issue HMRC has created a Gform that will enable NETPs to send their bank account information in order that the issue of a payable order can be avoided and a Clearing House Automated Payment System (CHAPS) payment made instead.

Access

HMRC systems do not currently have CHAPS functionality or the ability to store overseas bank information. However, once a NETP has completed the form, which is accessed via the Government Gateway HMRC will set a lock on the taxpayer’s record to prevent the payable order being automatically issued. NETPs will then receive their repayments directly into their bank account without the need to visit their bank to cash a payable order.

Information required

Information requested on the Gform will include:

  • VAT registration number
  • address
  • email address
  • bank account information
  • payable order information if necessary

VAT: HMRC OSS updates

By   5 October 2021
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HMRC has issued two new documents which provide practical guidance for users of the One Stop Shop (OSS).

They cover how to pay the VAT due on an OSS return and how to use the service to submit an OSS VAT return if a business is registered for the OSS Union Scheme. A link has been added to allow a business to submit a OSS return directly.

VAT: Land and property exemptions

By   5 August 2021
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Further to my article on VAT: Land and property simplification and HMRC’s call for evidence the ICAEW has reiterated its call for all VAT land and property exemptions to be abolished and recommends the removal of all VAT options.

ICAEW also concludes that following the UK’s departure from the EU the government is in the best position since the introduction of VAT to thoroughly review the structure of the tax.

ICAEW also suggests that all land and property transactions should subject to VAT at either the standard rate or reduced rate, other than those relating to domestic property which should remain zero rated. This approach would remove many of the complexities of the current regime, it concludes.

Commentary

This is one area of the tax that is crying out for simplification and the case put forward by ICAEW has its merits. In my view, the Government should go further and review many complexities of the tax. As one example, the rules in respect of the sale of food products is ridiculously complex and produces odd and unexpected outcomes. Also, other exemptions would benefit from reconsideration, particularly financial services and insurance, but I suspect that the current government has a lot on its plate, much of it of its own making.

Businesses still owe £Billions after VAT deferral

By   27 July 2021
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Over 25% of VAT registered businesses that were permitted to delay VAT payments as a result of the pandemic still owe HMRC the tax deferred.

The now closed payment scheme permitted VAT registered persons to defer VAT payments due between March and June 2020 and around 600,000 businesses took advantage of the relief. The deadline was 30 June 2021, and it has been stated that over a quarter of business have failed to contact HMRC about their debts and have not made the necessary payments.

The total outstanding, according to The Treasury, is £2.7 billion which represents circa 9% of the VAT take. Of the tax deferred under the scheme, £17.8 billion has been paid and around £13 billion is being paid via monthly instalments.

HMRC have announced its approach to collection VAT debt after Covid19.

It has also become clear is that businesses and consumers have fallen into default during and after the pandemic. It is anticipated that the ability to settle of debts on time will decrease and it is apparent that many debts will never be settled. Consequently, it appears timely to look at the available relief. An article on VAT Bad Debt Relief here.

We would urge, that even if a business cannot make a payment, that it still submits VAT returns on time. It is tempting to accept a centrally issued assessment if it is for a lesser amount than the actual VAT due for the period. However, such action can, and often does, lead to penalties and increased interest from HMRC.

VAT Grouping – As you were

By   21 July 2021
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HMRC published a call for evidence last year in respect of the VAT group registration provisions, specifically:

  • the establishment provisions
  • compulsory VAT grouping
  • grouping eligibility criteria for businesses currently not in legislation, including limited partnerships

The call for evidence was used to gather information and views on the current UK rules, and on provisions that have been adopted by other countries.

Background

VAT grouping is a facilitation measure by which two or more eligible persons can be treated as a single taxable person for VAT purposes. Eligible persons are bodies corporate, individuals, partnerships and Scottish partnerships, provided that certain conditions are satisfied. Bodies corporate includes all types of companies and limited liability partnerships. From 1 November 2019, grouping is additionally available for all entities, including; partnerships, sole traders and Trusts in certain cases. We consider the pros and cons of VAT grouping here.

Outcome

HMRC state that it was clear from the responses how valuable UK VAT grouping is to businesses and it is appreciated that businesses require certainty following Brexit and the impact of Covid 19. The call for evidence prompted a substantial number of responses that were generally in favour of maintaining current practices. It also set out evidence on why changes to the provisions on VAT grouping would impact business growth and international competitiveness.

Consequently, HMRC has decided that there will be no changes to the VAT grouping rules.

*  a sigh of relief * 

With everything else going on in the VAT world, a little continuity is welcome.