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Deeks VAT News Issue 25

Keeping you up on VAT Changes

Welcome to the July 2022 edition of Deeks VAT News. 

In this edition, we cover the following:

Headline News – A successful Business Relocation and expansion

Some of you may have noticed we have taken a break in publication of our monthly newsletters. This was to enable the business to focus on a smooth relocation from Northumberland to South Yorkshire. We are pleased to say that this has completed as expected. We hope that you will excuse the delay in updates as, during this time, it remained our priority to ensure that our client work did not suffer.

We look forward to keeping our connections to the North-East and nationwide open. As ever we are available online, via email, website, LinkedIn profiles, our new listing with Handpicked Accountants, and always at the end of the phone.

In addition to this, we are pleased to announce that we have recently expanded our team, and have new team members who will be proving the following specialist services:

  • SDLT
  • Direct tax consultancy advice and planning
  • Research & development
  • International VAT and Customs Duty

Keep an eye on our website for updates shortly.

Finance Bill 2022-23: Legislation Day 20 July 2022

The Government has released documents in advance of potential inclusion in the next Finance Bill, which largely cover pre-announced policy changes, along with accompanying explanatory notes, tax information and impact notes, responses to consultations and other supporting documents. All publications are available on the gov.uk website.

A few hours after the date for L-Day was announced, Rishi Sunak resigned as Chancellor. The new Chancellor (at the time of writing, Nadhim Zahawi) may take a different view on policies and it is possible some legislation may not be taken forward at this time.

The recent increase in NICs for the subsequent Health and Social Care Levy has already been legislated for.

Making Tax Digital for VAT — are you signed up?

HMRC have reiterated in a recent Agent Update (97) that all VAT-registered businesses should now be using Making Tax Digital compatible software to keep records digitally and submit tax returns to HMRC.

HMRC have also issued a step by step guide to sign up to Making Tax Digital. You can also check online when you should submit your first Making Tax Digital VAT Return

HMRC Guidance – Prepare for upcoming changes to VAT penalties and VAT interest charges

HMRC issued Guidance on 9 May 2022 which sets out detail on new VAT penalties and interest charges that will apply to everyone who submits a VAT Return from 1 January 2023.

For VAT periods starting on or after 1 January 2023, the default surcharge will be replaced by new penalties if you submit VAT returns late or pay VAT late. Late submission penalties will work on a points-based system. For each VAT Return you submit late you will receive one late submission penalty point. Once a penalty threshold is reached, you will receive a £200 penalty and a further £200 penalty for each subsequent late submission.

The late submission penalty points threshold will vary according to your submission frequency. You will be able to reset your points back to zero if you:

  • submit your returns on or before the due date for your period of compliance — this will be based on your submission frequency, and
  • make sure all outstanding returns due for the previous 24 months have been received by HMRC.

There will also be changes to how VAT Interest is calculated. From 1 January 2023, HMRC will charge late payment interest from the day your payment is overdue to the day your payment is made in full. Late payment interest is calculated as the Bank of England base rate plus 2.5%.

HMRC Guidance – How to value goods for import VAT

On 16 May, HMRC issued updates to its Guidance covering how to value goods for import VAT. Additional information has been added about moving goods into Northern Ireland.

If you move goods into Northern Ireland that are ‘at risk’ of onward movement to the EU, you may have to pay the applicable customs duty. The VAT due should be calculated on the customs value including any duties due. You should continue to work out the customs value and add the VAT value of your goods to box 22 of your import declaration as normal.

Partial Exemption Special Method Update

HMRC has recently updated its guidance in VAT Notice 706 – Partial exemption. The information on how to get approval for a special method has been updated.

It is now possible to use an online service, write to Written Enquiries or send an email. All the details are in paragraph 6.2 of the Notice, where there is a link to the online service. The email service is being withdrawn from 1 August 2022.

MTD ITSA legislation

In addition, from April 2024, all businesses with annual income from self-employment or property above £10,000 will have to follow Making Tax Digital rules.

HMRC has started encouraging agents to sign clients up to the Making Tax Digital income tax self-assessment pilot.

HMRC’s draft legislation has confirmed that those with turnover under the VAT threshold will be asked to submit just two figures to HMRC under the scheme’s new quarterly update requirements.

OTT Notification – Change to Process 

Continuing the theme of pilots and trials, HMRC have been recently working slightly differently when processing Option To Tax notifications.

The trial became effective from 30/05/2022 and will last for 6 weeks, with the aim of the trial being to speed up HMRC’s review process by increasing internal efficiency, while maintaining legislative and security obligations.

Currently, when a customer notifies of an intention to Opt to Tax a property (through a VAT 1614A form), HMRC acknowledge the notification and carry out an extensive series of checks on the notification itself.

Section 4.2.4 of VAT Notice 742A states that HMRC ‘will normally acknowledge receipt of your notification, although this is not necessary for the option to tax to have legal effect’.

During the trial, HMRC will continue to acknowledge receipt of a taxpayer notification but will no longer acknowledge its validity – this is the responsibility of the opter themselves. The option to tax acknowledgement letter issued by HMRC will become an acknowledgement of a receipt of the option to tax from the customer.

HMRC hope that the result of this change will be a more efficient and sustainable level of service. The changes to internal processes should act to better serve customers and provide more clarity in communications, speeding up the option to tax process.

Form VAT1614A will remain the same and taxpayers should continue to use this document to notify HMRC of an option.

Revenue & Customs Brief 8 (2022): Single DIY Claim First-tier Tribunal – Andrew Ellis and Jane Bromley

This brief clarifies HMRC’s position on making a claim under the DIY Housebuilders Scheme, following the First Tier Tribunal’s decision in the case of Andrew Ellis and Jane Bromley.

Under the scheme a housebuilder can submit a single claim within 3 months of completion. HMRC policy is that only a single claim is allowed under the scheme.

Where it is agreed that a claim has been repaid in error, HMRC will accept a subsequent claim with evidence that the claim has been made within 3 months of completion.

Revenue & Customs Brief 9 (2022) – VAT domestic reverse charge for mobile phones and computer chips

On 25 May 2022, HMRC updated its guidance in VAT Notice 735 – Domestic reverse charge to reflect the change announced in Revenue & Customs Brief 9/2022 last week.

The change removes the need for suppliers to complete a Reverse Charge Sales List from 1 July 2022.

Revenue & Customs Brief 10 (2022): VAT — Business and Non-business activities

This brief explains how HMRC now approaches determining whether or not an activity is a business activity.

In determining this, there should be no reliance on an organisation’s overall objective or profit motive.

Plastic Packaging Tax

Increasingly, policymakers are using tax as a lever to encourage transformative action. Illustrating this, the UK Government has this year implemented the UK Plastic Packaging Tax (PPT), which aims to increase the use of recycled plastic in plastic packaging. HMRC has published a collection of its Guidance online.

Specifically, HMRC’s Guidance has been recently updated and now explains how to obtain relief on exported and converted packaging in the same accounting period, or claim a credit for them on a later tax return.

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