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Category: VAT

Extension of Making Tax Digital for VAT

Extension of Making Tax Digital for VAT

Making Tax Digital (MTD) for VAT is currently only compulsory for VAT-registered businesses whose turnover for VAT is above the VAT registration limit of £85,000. However, this is set to change from April 2022.

Extension to all VAT-registered businesses

Currently, if you are registered for VAT, but your turnover for VAT purposes is less than the VAT registration threshold of £85,000, you can join MTD for VAT voluntarily.

From 1 April 2022 onwards, MTD for VAT will become compulsory for all VAT-registered businesses, regardless of their turnover. If you are registered for VAT, your turnover is below the VAT registration threshold of £85,000 and you have not joined MTD for VAT voluntarily, MTD for VAT will apply to you from the start of your first VAT accounting period which begins on or after 1 April 2022.

Getting ready

If you will fall within the scope of MTD for VAT on or after April 2022, you will need to plan ahead. Under MTD for VAT, you must maintain digital VAT records and file your VAT returns using MTD-compatible software. HMRC publish details of compatible software packages which can be used.

You will also need to sign up for MTD for VAT.

We can help

We can help you get ready for MTD for VAT. Why not get in touch?

October 23, 2021

EU e-commerce package for VAT

EU e-commerce package for VAT

The EU e-commerce package came into effect on 1 July 2021. It introduced reforms in respect of the movement of goods from Northern Ireland to the EU and imports of low value goods into the EU or Northern Ireland.

Who is affected?

The changes will affect you if you:

  • sell or supply goods from Northern Ireland to non-VAT registered customers in the EU;
  • make supplies of goods from the EU to non-VAT registered customers in Northern Ireland;
  • send low value goods to Northern Ireland or the EU from Great Britain or elsewhere outside the EU and Northern Ireland; or
  • are a non-EU business with goods located in Northern Ireland at the point of sale.  

New distance selling threshold

A new pan-European distance selling threshold of €10,000 (£8,818) applies from 1 July 2021.

The new distance selling threshold will apply to you if you are a business selling goods to consumers based in Northern Ireland. You will fall within the scope of the rules if the annual value of your sales of goods across the EU exceeds this level. There is no need to take account of sales of services as these do not count towards the threshold.

One Stop Shop

A new One Stop Shop (OSS) has been introduced to prevent businesses falling within the scope of the rules from having to register in each EU member state in which they have customers. If you are a Northern Irish business selling goods in excess of the new €10,000 threshold to EU consumers, you can register for the OSS, rather than registering for VAT in each member state in which you have customers. Registering with the OSS is optional, but it will enable you to declare and pay VAT for EU goods quarterly via one online portal. You can register either in the UK or in a member state with which you do business. If you register in the UK, you will need to be registered for UK VAT, even if your turnover is below the VAT registration threshold.

Low value consignment relief

Low Value Consignment Relief (which provided an exemption from import VAT for consignments of goods valued at less than €22 which were sold online to customers in the EU) was abolished with effect from 1 July 2021. This means that if you sell goods online to EU customers, you will now need to pay import VAT in the country in which the customer is based.

Import One Stop Shop (IOSS)

The Import One Stop Shop (IOSS) was introduced from 1 July 2021. The IOSS, which can only be used for consignments valued at €150 (£135) or less, allows registered businesses to collect the import VAT on business-to-customer (B2C) orders at the point of sale. If you do not register to use the IOSS, VAT will be collected on importation into the EU, as for high value consignments.

If your business is established outside the EU, to use the IOSS, you will need to appoint an intermediary to act on your behalf. This will be the case if your business is established in the UK.

Online marketplaces

The package also introduces new rules for supplies made to online marketplaces importing goods into the EU and Northern Ireland. These are similar to the rules that have applied for imports into Northern Ireland from outside the UK and the EU since 1 January 2021.  

We can help

We can help you understand what the reforms mean for you, and what you need to do. We can also explain how the rules apply to you if you use an online marketplace to import goods.

August 18, 2021

Domestic VAT reverse charge for building and construction services

Domestic VAT reverse charge for building and construction services

The domestic VAT reverse charge for building and construction services finally comes into effect on 1 March 2021. The start date was originally 1 October 2019, but it was postponed by one year until 1 October 2020 to allow those affected more time to prepare. The start date was further delayed – until 1 March 2021 — as a result of the COVID-19 pandemic.

Detailed guidance on the charge can be found on the Gov.uk website.

Nature of the charge

Under the domestic VAT reverse charge, the customer receiving the service must pay the associated VAT to HMRC rather than paying it to the supplier. The charge will be relevant to you if you are an individual or a business that is registered for VAT in the UK, and you supply or receive specified services that are reported under the Construction Industry Scheme (CIS). If you are a customer, you will pay the supplier the amount net of VAT and pay the VAT to HMRC. If you are a supplier, you will receive payment net of VAT and will no longer need to pay the VAT to HMRC.

Services within the scope of the charge

The following services fall within the scope of the charge:

  • constructing, altering, repairing, extending, demolishing or dismantling buildings or structures (whether permanent or not), including offshore installation services;
  • constructing, altering, repairing, extending or demolishing any works forming, or planned to form, part of the land, including walls, roadworks, power lines, electronic communications equipment, aircraft runways, railways, inland waterways, docks and harbours, pipelines, reservoirs, water mains, wells, sewers, industrial plant and installations for the purpose of land draining, coast protection or defence;
  • installing heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection systems in any building;
  • internal clearing of buildings and structures which is carried out in the course of their construction, alteration, repair, extension or restoration; and
  • services that form an integral part of, or are part of, the preparation or completion of the services described above, including site clearance, earth-moving, excavation, tunnelling and boring, laying of foundations, erection of scaffolding, site restoration, landscaping and the provision of roadways and other access works.

Exclusions

The domestic VAT reverse charge does not apply to:

  • drilling for, or extracting, oil or natural gas;
  • extracting minerals (using underground or service working), and tunnelling, boring or the construction of underground works for this purposes;
  • manufacturing building or engineering components or equipment, materials, plant or machinery, or delivering any of these to site;
  • manufacturing components for heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection systems, and delivering any of these to site;
  • the professional work of architects or surveyors, or of building engineering, interior or exterior decoration or landscaping consultants;
  • making, installing and repairing art works, such as sculptures and other items that are purely artistic, signwriting, and erecting, installing and repairing signboards and advertisements;
  • installing seating, blinds and shutters; and
  • installing security systems, including burglar alarms, closed circuit television and public address systems.

Preparing for the charge

If you are an individual or business that falls within the scope of the charge, you will need to ensure that you are ready to apply it from 1 March 2021. In preparation, you will need to check that your accounting systems and software can cope with the reverse VAT charge, and upgrade them if necessary. You should also ensure that any staff who deal with VAT understand the changes and what they need to do to comply.

It is also prudent to assess how the charge will impact on your cash flow, particular if you supply services that fall within the scope of the charge as you will no longer receive the associated VAT.

Completing the VAT return

If you are a supplier, you must not enter any output tax on any sales that fall within the domestic VAT reverse charge on building and construction services on your VAT return. Instead, you only need to enter the net sales value.

If you are a customer purchasing services within the scope of the charge, you must account for the associated VAT to HMRC by including it as output tax on your VAT return. You should not enter the net value of the purchase as a net sale. You can reclaim the input tax on your reverse charge purchases in accordance with normal VAT rules.

We can help

We can help you to prepare for the introduction of the charge, and comply with your obligations in relation to it.

January 6, 2021

Some Brexit reminders

Some Brexit reminders

The Brexit transitional period comes to an end on 31 December 2020. As a result, new rules will apply from 1 January 2021. As the situation is evolving, it is recommended that you check the guidance on the Gov.uk website regularly.

EORI number

From 1 January 2021 you will need an EORI number to move goods between Great Britain and the EU. You may also need a separate EORI number to move goods between Great Britain and Northern Ireland. You can find out more on the Gov.uk website.

Postponed VAT accounting

From 1 January 2021, postponed VAT accounting will apply if you are a VAT-registered business and you import goods into the UK. Under postponed VAT accounting, you can account for the import VAT on your VAT return for goods imported from anywhere in the world. More information can be found on the Gov.uk website.

Customs declarations

The rules governing when customs declarations need to be made also change from 1 January 2021. Note that different rules apply to Northern Ireland and Great Britain. Check the guidance for details of the declarations that are required when sending goods from the UK, and also the guidance on the declarations required when bringing goods into the UK.

Contact us

We can help you manage the transition to the new rules.

December 23, 2020

Customs declarations from 1 January 2021

Customs declarations from 1 January 2021

The Brexit transitional period comes to an end on 31 December 2020. From January 2021, new arrangements apply if you send goods abroad from the UK or bring goods into the UK. It is important that you check what customs declarations you need to make from 1 January 2021 onwards.

Where goods are moved through Great Britain and Northern Ireland, Common Transit may affect the declarations that you need to make.

Sending goods from the UK

The first point to note is that the customs declarations that are required will depend on whether the goods are sent from Great Britain or from Northern Ireland – the rules are not UK-wide.

Sending goods from Great Britain

If you are sending goods from Great Britain to another country, the declarations that are needed will depend on the country to which the goods are being sent.

If you are sending goods from Great Britain to Northern Ireland, you will not need to make a declaration when you send the goods. However, you may need to make a declaration when the goods arrive in Northern Ireland. If you move goods between Great Britain and Northern Ireland, you can make use of the Trader Support Service.

From 1 January 2021, if you are sending goods from Great Britain to a country in the EU, before the goods leave Great Britain, a declaration will be needed and also an exit summary (safety and security) declaration if this is not already included in your declaration.

The procedure for sending goods from Great Britain to a country outside the EU (other than Northern Ireland) is unchanged from 1 January 2021 – a declaration is needed before the goods leave Great Britain, and also an exit summary if this is not included in the declaration.

From 1 January 2021, the procedures are the same where goods are sent from Great Britain to a country other than Northern Ireland.

Sending goods from Northern Ireland

In most cases, you will not need to make a customs declaration when sending goods from Northern Ireland to Great Britain. However, the Government are yet to publish guidance on when declarations may be needed for certain goods.

Unlike goods sent from Great Britain, you will not need to make a customs declaration from 1 January 2021 if you send goods from Northern Ireland to a country in the EU.

However, as now, if you send goods outside the EU from Northern Ireland, you will need to make a customs declaration and you will also need an exit summary if this is not included in your declaration.

Bringing goods into the UK

If you are a UK-based business and you bring goods into the UK, the customs declarations that you need to make from 1 January 2021 onwards will depend on where the goods have come from and whether you are bringing them into Great Britain or Northern Ireland.

Bringing goods into Great Britain

You will not need a customs declaration for most goods that you bring into Great Britain from Northern Ireland. Guidance on the declarations needed for certain goods is yet to be published.

From 1 January 2021, the customs declarations that are needed if you bring goods into Great Britain from an EU country will depend on whether the goods are controlled goods or not. If they are, you must make a customs declaration when the goods arrive. If the goods are not controlled goods, you may be able to delay making declarations and instead record the goods in your own records and tell HMRC about them up to six months later. Guidance on whether you can take advantage of these procedures can be found on the Gov.uk website. This may be an option if you are moving goods from the EU into free circulation in Great Britain between 1 January and 30 June 2021.

A customs declaration and an entry summary are needed for goods brought into Great Britain from outside the EU or Northern Ireland.

Bringing goods into Northern Ireland

From 1 January 2021, you will need to make a customs declaration when goods arrive into Northern Ireland from Great Britain. An entry summary is also required.

However, you will not need a declaration for any goods that you bring into Northern Ireland from the EU. If you bring goods into Northern Ireland from outside the EU, other than from Great Britain, as now, you will need a customs declaration and entry summary.

Talk to us

Making customs declarations can be complicated and you may want to appoint someone to handle this on your behalf. Talk to us to find out how we can help.

November 25, 2020

More time to pay your tax bills

More time to pay your tax bills

In his Winter Economy Plan, the Chancellor, Rishi Sunak, unveiled measures which will allow self-assessment taxpayers and VAT-registered businesses more time to pay back deferred tax.

New Payment Plan for VAT

At the start of the pandemic, VAT-registered business could delay paying VAT where it fell due between 20 March 2020 and 30 June 2020. VAT falling due after that date – i.e. that for VAT quarters ending on or after 31 May 2020 – must be paid in full and on time.

Under the original proposals, if you took advantage of the opportunity to defer paying your VAT due to Coronavirus, you had until 31 March 2021 to pay it. However, if this is likely to be difficult, you can take advantage of the New Payment Plan for VAT and instead pay your deferred VAT in 11 interest-free instalments over the 2021/22 tax year. This will mean that you will have an additional year – until 31 March 2022 rather than 31 March 2021 – to pay the full amount. To take advantage of the instalment option, you will need to opt in. HMRC will publish details of how to do this over the coming months.

Enhanced Time-to-Pay for self-assessment

If you owe tax under self-assessment, you will be able to use enhanced Time-to-Pay arrangements to set up a monthly repayment plan online, without the need to call HMRC. Taxpayers can now use this service as long as they do not owe more than £30,000 in tax. Previously, the service was only available to taxpayers owing £10,000 or less.

Self-assessment taxpayers were able to opt to delay the second payment on account for 2019/20, which was due by 31 July 2020. Under the original proposals, the deferred tax had to be paid by 31 January 2021, together with any balancing payment for 2019/20 and the first payment on account for 2020/21.

If you need more time to pay your tax, you can use HMRC’s self-service facility to set up a Time-to-Pay plan. This will give you an additional 12 months (until 31 January 2022) in which to pay the second payment on account for 2019/20, any balancing payment for 2019/20 and the first payment on account for 2020/21.

Get in touch

Contact us to find out how we can help you set up payment plans and budget for your tax bills.

October 29, 2020

Postponed VAT accounting

Postponed VAT accounting

Postponed VAT accounting is being introduced from 1 January 2021. This will affect you if you are VAT-registered and you import goods into the UK, particularly if you are a smaller business and you do not currently use the Duty Deferment Scheme. Postponed VAT accounting will apply to goods imported into the UK from all countries, regardless of whether they are in the EU or not.

Nature of postponed VAT accounting

The Brexit transition period comes to an end on 31 December 2020. From 1 January 2021, if you are a VAT-registered business in the UK, you will be able to account for import VAT on your VAT return for goods imported from anywhere in the world. This is good news as it means that you will declare and recover VAT on the same VAT return, rather than having to pay it upfront and recover it at a later date. This will be beneficial from a cash flow perspective.

The introduction of postponed accounting does not change the VAT that can be recovered as input tax; normal rules continue to apply.

Accounting for import VAT on your VAT return

You can start to account for import VAT on your VAT return from 1 January 2021. You do not need to be authorised in order to do so.

You can account for import VAT on your VAT return if:

  • you import goods for use in your business;
  • you include your EORI number, which starts with ‘GB’, on your customs declaration; and
  • you include your VAT registration on your customs declaration where needed.

You can also account for import VAT on your VAT return if you use certain customs special procedures, or if you release excise goods for use in the UK (also known as ‘released for home consumption’).

If you are eligible to defer submitting your supplementary declaration for up to six months, you must account for import VAT on your VAT return.

Customs special procedures

If you initially declare goods using one of the following special procedures, you can account for import VAT on your VAT return when you submit the declaration to release the goods into free circulation. The relevant customs special procedures are:

  • customs warehousing;
  • inward processing;
  • temporary admission;
  • end use;
  • outward processing; and
  • duty suspension.

Completing your VAT return

From 1 January 2021, there are some changes in the way in which you will need to complete your VAT return if you are a UK VAT-registered business importing goods into the UK and you account for import VAT on your VAT return.

You will be able to download an online monthly statement which will show the total import VAT postponed for the previous month, and which should be included on your VAT return. You should keep this statement for your records.

The changes affect boxes 1, 4 and 7.

In Box 1, you must include the VAT due in the VAT accounting period on imports accounted for through postponed accounting.

In Box 4, you must include the VAT reclaimed in the VAT accounting period on imports accounted through postponed VAT accounting.

In Box 7, you must include the total value of all imports of goods included on your monthly online statement, excluding any VAT.

If you are eligible to defer your customs declarations, you must account for import VAT on the VAT return that covers the date on which you imported the goods. To do this, you will need to estimate the import VAT that is due from your records of the imported goods. When you submit your deferred declaration, your next online monthly statement will show the amount of import VAT due on that declaration. You must then account for any difference between the estimated figure and actual figure for the import VAT on your next VAT return.

When you can’t use postponed accounting

If you are authorised to use simplified declarations for imports and you complete your simplified frontier declaration before 1 January 2021, you will not be able to use postponed accounting to account for import VAT on your VAT return. This is the case even if you complete your supplementary declaration after 1 January 2021.

Consignments not exceeding £135 in value

HMRC are to issue guidance in due course on the VAT treatment of goods on consignments which do not exceed £135 in value.

We can help

Speak to us to find out what the changes mean for your business.

October 2, 2020

Reduced rate of VAT for hospitality sector

Reduced rate of VAT for hospitality sector

To support businesses and jobs in the hospitality sector, the reduced (5%) rate of VAT applies to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar establishment across the UK for a temporary period from 15 July 2020 to 12 January 2021.

The reduced rate of VAT (5%) also applies to supplies of accommodation and admissions to attractions during this period.

Guidance on the application of the reduced rate can be found on the Gov.uk website.

Speak to us

If you operate in these sectors, talk to us about what the reduced rate of VAT will mean for you.

July 2, 2020

Making Tax Digital – soft landing extension

Making Tax Digital – soft landing extension

One-year extension for MTDfV soft landing

In a welcome response to COVID-19, HMRC has extended its digital links ‘soft landing period’ by twelve months to April 2021.

HMRC Email

In a widely distributed email issued on 30 March 2020, HMRC stated:

“We understand that the impact of COVID-19 is creating extremely difficult times for all, and we are committed to helping in every way possible all those businesses facing unprecedented challenges.

Therefore, we are providing all MTD businesses with more time to put in place digital links between all parts of their functional compatible software. This means that all businesses now have until their first VAT return period starting on or after 1 April 2021 to put digital links in place.”

Digital journey

From April 2019, once those mandated to comply with VAT MTD have entered accounting data into their business’s accounting software, they have been required to transfer, recapture or modify that data using digital links. Effectively, once VAT data has been digitally captured the rest of its journey until the submission of a VAT return must be a digital journey, without manual intervention.

Soft landing

HMRC recognised that not all businesses would have digital links in place from day one and allowed a period of grace, the ‘soft landing period’. HMRC promised that, where businesses were trying to meet the statutory digital end to end journey during the ‘soft landing period’, the department would not impose penalties for non-compliance.

The effect of the ‘soft landing’ announcement meant that for the first year of mandation, businesses are not required to have digital links between software programs.

For most, MTD for VAT rules have applied from VAT period starting on or after 1 April 2019. Although there was a smaller group where mandation was deferred until the start of the first VAT return period on or after 1 October 2020.

What it means

All businesses mandated to comply with MTD for VAT now have until their first VAT return period, starting on or after 1 April 2021, to put digital links in place.

Given the coronavirus related troubles affecting practically all businesses in the UK, this extension to the ‘soft-landing period’ is another sensible easement that is to be much welcomed.

April 16, 2020