EU Excise Duty changes now in effect – what this means for your business

Major changes to the way businesses process goods moving between EU Member states and Northern Ireland where excise duty has been paid came into effect on February 13 and anyone dealing with relevant goods must comply.

The new Excise Movement and Control System (EMCS) is replacing the former paper-based system to track the movement of duty paid goods, when it was previously only used to track duty suspended goods.

The changes

From February 13, all duty paid goods must use an electronic Simplified Administrative Document (e-SAD) which replaces the paper Simplified Accompanying Administrative Document (SAAD). The former needs to be raised on the EMCS and a movement guarantee – which is a financial guarantee covering the excise duty on the goods – which will be given once the details of the goods being transported are entered.

Has anything else changed?

There are some additional changes to other schemes to accommodate these changes, including the Registered and Unregistered Commercial Importer Schemes being replaced by the Certified Consignee and Temporary Certified Consignor trader types. These are being introduced for traders sending and receiving goods where the excise duty has been paid. Your local Customs authority will need to approve you to give you access to the EMCS.

We can help you meet your obligations

If you need to move goods across borders in EU Member states, then please get in touch and we can help you to navigate these changes.

New VAT penalty regime – the changes explained

A new VAT penalties regime was brought in this month, and any firms or individuals missing their filing deadline from January 2023 onwards will receive penalty points even if there is no VAT due to be paid.

While this may sound more benign than getting a fine, persistent late filing could lead to more costs as the points add up. You will get one penalty point for each late VAT filing, and these points accrue for every late filing within a specific period. Once you or your business reaches the threshold of points for each time period, which varies depending on how regularly you have to file your VAT returns, you will then face a fine of £200.

How the points system works

The points threshold also varies depending on the frequency you file VAT returns, and how often within that period you file late. For example, if you file your VAT returns annually, the threshold before you get a penalty is just two points. So, filing late two years in a row would mean you hit your threshold and would face a fine.

If you file quarterly, you have a four-point threshold, and monthly you have a five-point threshold. You get a penalty point for each time you file a VAT return late, so if you file quarterly and have previously filed three returns late, then a £200 penalty would be applied if one more return is filed late giving you a fourth point and hitting the threshold.

Removing penalty points

If you do not reach the threshold for your penalty points, then your points will expire automatically and when this happens depends entirely on when your return deadline was. If your filing deadline is a date before the end of the relevant month, your penalty point for that period will expire at the end of that month 24 months later. If your deadline was the end of the month, then any points imposed for late filing will expire 25 months after that date, again providing you have not hit the threshold.

If you have hit the threshold, then you need to keep submitting returns on time for a set period to remove those points and prevent further financial penalties being applied.

How long do I need to comply with the VAT return deadlines to have my points removed?

The companies and individuals who have reached the threshold for points and been hit with a penalty need to file on time for a specific period to clear the points from their record. This is known as ‘the period of compliance’ and how long you need to comply will again depend on how often you file your returns.

For example, those filing annual returns will need to file two returns on time, so it will take 24 months, to clear their points. If you file quarterly, you will need to file four returns on time over 12 months to clear the points, and if you file monthly, then you need to file six returns on time over six months to return to zero points. In addition, you will also need to submit all outstanding returns for the previous 24 months.

However, there is also a new interest penalty imposed for unpaid VAT which will apply for accounting periods starting on or after January 1, 2023. The first penalty would apply if you have not paid the outstanding tax due within 15 days of the date it should have been paid. This would be 2% of the outstanding amount after this period, and if it remained unpaid for 30 days, then the penalty would be “calculated as 2% of the tax outstanding after day 15 plus 2% of the tax outstanding at day 30” according to HMRC. This typically will be a 4% charge at 30 days after the original tax due date.

If the tax is still not paid, then from day 31, a daily accruing penalty at 4% a year will begin to be added to the amount and will only stop when the tax is paid. HMRC will allow taxpayers to request a Time-to-Pay arrangement which will stop the clock on these penalties accruing by agreeing a schedule of payments to deal with the tax due.

You can find out more information about the points regime and any fines that could be imposed, along with how you deal with this points regime if you have a non-standard accounting period, at Gov.uk and about the interest penalties also at Gov.uk.

We can help you

If you have concerns about your compliance with the VAT filing regime, then speak to us and we will work with you to ensure you do not fall foul of the new rules.

VAT and COVID – what you need to know if you still have delayed payments outstanding

All deferred VAT payments should have been dealt with by now, but HMRC has flagged in its latest bulletin for August that if your business is one of those that still has not managed to complete the payments that have been delayed, then you could be facing a penalty.

During COVID, HMRC allowed businesses to defer VAT payments to help with cashflow problems that companies faced as a result of the lockdowns. These payments could have been deferred to either March 31, 2021, when a lump sum would have been due, deferred via a payment scheme which you needed to sign up to by June 21, 2021 to allow you to pay in interest-free instalments, or by contacting HMRC to arrange how to make the payment by June 30, 2021. All of these payments should have been completed by March this year, but if they have not been paid in full, then you should act as soon as you can.

Any outstanding payments could face a penalty

If you have not yet dealt with your deferred payments, then you could now face a 5% penalty from HMRC and potentially also face interest charges on any amounts outstanding. But if your company is still struggling with these payments, then you should contact HMRC sooner rather than later.

If you have not paid your deferred VAT in full, whether you met the previous deadline of setting up arrangements to pay before June 30, 2021, or not, then the 5% penalty could be applied based on the amount of VAT that is outstanding at the time.

Appealing a penalty

If you feel a penalty has been unfairly applied, then you can appeal against it. You would need to have a reasonable excuse, which would include: a close relative dying close to when the penalty payment is due, an unexpected hospital stay or that you are suffering from a serious or life-threatening condition, or that your software failed when you were about to make the payment. Other relevant reasonable excuses can be found on Gov.uk.

If none of these apply, then you would need to make the payment within 30 days.

We can help you meet your obligations

If you think you have outstanding deferred VAT and do not know how to deal with this properly, then please get in touch and we can help to suggest solutions for you.

Last chance to make sure your business is ready for MTD

Companies and sole traders who have not yet finalised their plans to comply with Making Tax Digital are in the last chance saloon this month, and the very latest date you have to comply with MTD for paying VAT is August 7.

That is the latest date on which you will need to make your first – if you are not already doing this – MTD VAT return. So, if you have not already done so, you have very little time left to make sure you comply with this legislation.

Your responsibilities

Whether you are required to pay VAT – because your business turnover is above the £85,000 threshold at which you are required to register – or because you have voluntarily registered, you now must keep your records and file your returns electronically.

How do I file?

From April 1, you will need to have filed any VAT due through MTD-compatible software, which includes the likes of QuickBooks and Xero, among others. If you are not able to file your return this way, then HMRC can currently issue a £400 fine. But from January next year, HMRC is due to bring in a points system, which means you accrue points each time you miss a deadline. Once you hit a certain number of points, you will face a £200.

So, the best thing you can do is prepare yourself properly. If you have not sorted this out already, you really are running out of time.

We can help you meet your obligations

If you are not yet registered to deal with MTD through relevant accounting software, then we can help you. But there is no time to lose. Please get in touch with us as soon as you can, and we will do everything in our power to help you meet your filing deadlines.

End of bulk appeals for tax fines in May

If you are unlucky enough to be fined for a late filing, then the way in which any appeal can be made changed as of May 7.

Prior to this, HMRC had temporarily reintroduced the ability to bulk appeal late filing penalties for income tax in 2020 and 2021. But from now onwards, all such appeals need to be made individually.

To be fair, if you keep in close contact with your accountant and give sufficient time for all of the paperwork to be done, then you should not be in a position where you are facing a late filing penalty. But if you have either filed paperwork late yourself or had a late filing penalty for some other reason, then each appeal now must be made individually.

Your responsibilities

Even though you use an accountant to deal with your tax liabilities, you are still ultimately legally responsible for the correct and timely filing of your returns. There are several different penalties that could apply too.

Types of penalties

For example, there is an ‘inaccuracy penalty’ which can be applied across specific taxes, including income tax, PAYE, capital gains tax, inheritance tax and corporation tax. This penalty could be anything from 0% to 30% of the extra tax due if the error occurred due to a ‘lack of reasonable care’.

If the error is considered deliberate, this rises to between 20% and 70% of the extra tax due, and if it is both deliberate and concealed, it could rise to between 30% and 100% of the extra tax due.

You could also face a penalty for a failure to notify HMRC of a change in your liability to tax. This could be, for example, if your company makes a profit and becomes liable to corporation tax. Or it could be because your business has reached the turnover for the VAT threshold (£85,000) and you have not registered for VAT.

Other penalties could include ‘Offshore penalties’ and ‘VAT and Excise wrongdoing penalties’ – so it is important if any of these could potentially apply to you, that you speak to your accountant immediately. You can find more information on the types of penalties that could apply on the GOV.UK website.

We can help you meet your obligations

If you think there is a chance that you could fall foul of any of these rules and face a penalty, or that there is any other issue you need advice on to make sure you comply with all your HMRC requirements, please contact us as soon as possible. We will help you navigate any problems that arise.

MTD D-Day has arrived – here’s how to make sure you comply

Anyone filing VAT returns from April 1, 2022 onwards now has to file their return digitally as HMRC’s Making Tax Digital reaches its next phase.

All businesses registered for VAT – even if they have turnover below the threshold – must file their returns this way from now on. The premise for changing to the MTD regime is to reduce the number of common mistakes made, according to HMRC, and will save taxpayers time when it comes to managing their tax affairs.

However, it is also a key plank of digitising the UK’s tax regime, and MTD is likely to have increased revenue to HMRC thanks to reduced errors in both 2019 and 2020, said HMRC.

Sign up now if you haven’t yet

Nearly 1.6m taxpayers had already joined MTD for VAT as of December 2021, and more than 11m returns have already been submitted this way. Around a third of those businesses with a turnover below the £85,000 VAT threshold signed up before April 1, 2022 and “thousands more are signing up each week”, said HMRC.

Lucy Frazer, Financial Secretary to the Treasury, said: “Businesses using MTD are saving time on their tax affairs, streamlining their processes, and boosting their productivity as a result.

“[This is] our first move towards a modern, digital tax service – MTD makes it easier for businesses to get their tax right first time. There is a range of support and information available for those that need it – including accessible online content such as YouTube videos, GOV.UK help pages and HMRC’s Extra Support service.

“Agents can sign up on behalf of a business, although businesses remain responsible for meeting their VAT obligations. Those who do not join may be charged a penalty for failure to do so.”

Businesses must sign up before they send their next VAT return

Any businesses that have not yet signed up need to before they file their first VAT return after April 1, 2022. There are a number of software options that can be used, including free options for the easiest of calculations, or more advanced for more complex affairs, said HMRC.

A list of software compatible with MTD for VAT is on Gov.UK and there are webinars being run by HMRC for taxpayers who need more help and support on signing up for MTD to make sure they comply.

There are some exemptions

Some VAT-registered businesses can receive exemptions, primarily where it is not reasonable or practical for them to use digital tools for their tax. These include reasons based on age or disability, or a religious objection to using computers. But any other reasonable basis for exemption will be considered by HMRC. You can find more information on whether an exemption may apply on Gov.UK.

While you are waiting for a final decision, continue to file your returns as you usually do.

MTD for income tax 2024

MTD is being extended to 4.2m income taxpayers who are landlords, sole traders and partnerships from 2024. Anyone with business and/or property income over £10,000 will be brought into the regime then. So, it is worth starting to plan ahead with your accountant to make sure this transition is as smooth as possible.

Contact us

Please get in touch with us to find out how we can help you if you are yet to sign up for MTD. We can help you comply with the new rules.

Help if you are struggling to pay your tax bill

Financially, 2021 has been a difficult year for many, and you may be struggling to pay your January tax bill in full. Any tax and National Insurance that remains unpaid for 2020/21 must be paid by 31 January 2022, along with the first payment on account for 2021/22.

Contact HMRC

If you cannot pay your tax bill on time, you should contact HMRC as soon as possible – you do not need to wait until the payment is late, and it is advisable not to do so. You will be able to discuss the help that is available to you, and may be able to pay what you owe in instalments by setting up a Time to Pay arrangement.

Time to Pay arrangements

A Time to Pay arrangement is an agreement with HMRC to pay the tax that you owe in instalments. The procedure for setting up a Time to Pay arrangement depends on the type of tax that you owe and the amount that you owe.

Self-assessment

If you are unable to pay your self-assessment tax bill, you may be able to set up a Time to Pay arrangement up online via your Government Gateway account. You can do this if:

• you have filed your latest tax return;
• you owe less than £30,000;
• you are within 60 days of the payment deadline; and
• you plan to pay off your tax debt within the next 12 months, or less.

This is the most straightforward way to arrange to pay what you owe in instalments. To avoid triggering unnecessary late payment penalties, if you know that you will struggle to meet your 31 January 2022 tax bill, it is advisable to ensure that your return is filed in good time so that a Time to Pay arrangement can be in place by this date.   

Unable to make an online arrangement?

If you are unable to set up a Time to Pay arrangement online, for example, if the tax that you owe is more than £30,000, you may be able to agree an instalment payment plan by calling HMRC’s self-assessment helpline on 0300 200 3822.

Other types of tax

If you owe tax other than that due under self-assessment, or if your company cannot pay tax that it owes, you can contact HMRC’s Payment Support Service on 0300 200 3835 to discuss setting up a Time to Pay arrangement.

Information required

To set up a Time to Pay arrangement you will need to have the following information to hand:

• your unique tax reference number;
• your VAT registration number if you are a VAT-registered business;
• your bank account details; and
• details of any previous payments that you have missed.

HMRC will ask you a number of questions, including:

• how much you can afford to repay each month;
• whether you are able to pay what you owe in full;
• whether there are any other tax bills that you need to pay;
• how much money you earn;
• how much you usually spend each month; and
• what savings and investments you have.

HMRC expect that if you are able to pay the tax that you owe, you will do so. Also, if you have any savings or assets, they expect that you will use those to meet your tax obligations.  

Where you are unable to pay what you owe in full, HMRC will usually set your monthly payments at about 50% of the money you have left over each month after you have paid your bills.

Once a Time to Pay agreement is in place, it is important that you pay at least the agreed amount each month. If you are able, you can pay more than the agreed amount if you want to clear the debt more quickly.

Unable to agree a Time to Pay arrangement?

If you are unable to agree a Time to Pay arrangement with HMRC, for example, if HMRC do not think you will stick to the agreement because you have defaulted in the past, you will be asked to pay what you owe in full. If you are unable to do this, HMRC may take enforcement action to collect the debt.

We can help

If you are struggling to pay tax that you owe or are worried about being able to pay your January self-assessment bill, talk to us. We can help you set up a plan to pay in instalments.

New VAT rate for hospitality and leisure

To help the hospitality and leisure industries recover from the impact of the COVID-19 pandemic and associated lockdowns, a reduced rate of VAT of 5% applied from 15 July 2020 until 30 September 2021. This rate has now come to an end, and a new reduced rate of 12.5% applies from 1 October 2021 until 31 March 2022. The rate of VAT applicable to this sector will return to the standard rate of 20% from 1 April 2022.

Supplies benefitting from the reduced rate

You are able to take advantage of the reduced rate of 12.5% if you make supplies of any of the following:

• food and non-alcoholic beverages sold for on-premises consumption, for example, in restaurants, cafes and pubs;
• hot takeaway food and hot takeaway non-alcoholic beverages;
• sleeping accommodation in hotels or similar establishments, holiday accommodation, pitch fees for caravans and tents, and associated facilities; and
• admissions to cultural attractions that do not already benefit from the cultural VAT exemption, such as theatres, circuses, fairs, amusement parks, concerts, museums, zoos, cinemas, exhibitions and other similar cultural events and facilities.

However, if the admission to an attraction is within the existing cultural VAT exemption, the exemption applies rather than the reduced rate of VAT.

Contact us

If you operate in the hospitality and leisure sector, please get in touch with us to check that you are applying the correct rate of VAT to any supplies that you make.

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?

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.

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.

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.

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.

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.

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.

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

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.

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.