Service: VAT 

Sector: Construction Professional services 

Topic: Brexit Coronavirus 

The VAT Bulletin: May 2021

04 May 2021

Welcome to the first in what will be a bi-annual newsletter summarising any new VAT legislation, interesting cases and other notable topics in the VAT world.

I think it is safe to say that 2021 will probably be have the most changes in VAT since its introduction back in 1973. 

We have the withdrawal agreement that has resulted in a change in the way the UK and in particular Great Britain trades with the EU both goods and services. We also have Northern Ireland and its particular treatment both for trade within the UK and when goods pass through that province to the Republic of Ireland. A further change accounting for VAT within the EU comes into force on 1 July.

The long awaited for and often postponed rules for accounting for VAT within the construction industry, the Domestic Reverse Charge (DRC) has now been introduced

In addition, there are also a number of small changes and announcements to keep track of, particularly with the pandemic easing and the gradual return to normality which will also include decisions on how to pay VAT that was suspended. 
Not surprisingly, this first edition of The VAT Brief is very EU heavy.

EU news

End of low value import VAT relief

From 1 July 2021 the exemption that applied to the import of goods from outside the EU will be abolished. This relates to goods with a value of below 22 Euros. 

I-OSS

I-OSS stands for Import One Stop Shop, and follows the Mini One Stop Shop and compliments the One Stop Shop. It relates to sales of goods made from a place outside of the EU at the time they are sold. It is effectively a way of accounting for VAT to end consumers (B2C) in the EU country of consumption which is the direction that VAT has been travelling over a number of years.

This system is being introduced from 1 July and relates to low value goods, ie under 150 Euros.

Businesses can apply for registration under I-OSS from 1 April 2021.

For relevant sales output tax will be due on the sale in the country where the customer belongs. The I-OSS allows a business to register in one member state but account for VAT on sales for all supplies to member states. This is not a consequence of Brexit, although the UK is treated as a non EU country which may make registering a little more complicated

VAT returns will need to be made monthly.

OSS

This stands for One Stop Shop. It applies to businesses that hold stock in one EU country but sell to consumers throughout the EU.

Much like I-OSS, it comprises of one registration where VAT is declared on one VAT return for sales to consumers in all member states apart from where the business is registered. This only applies if the seller only holds stock in one EU country
VAT returns will be made quarterly, as opposed to monthly under I-OSS.

For UK businesses therefore a non Union VAT registration will be required with a VAT return in the EU country of registration as well as a OSS return. 

UK News

Option to Tax

Currently, there is an increase in the period of time to notify the decision to opt to tax a property from 30 days to 90 days. This extension will finish on 30 June 2021.

Reduced rate on hospitality and tourism sector until 30 September

The reduced rate for hospitality supplies will continue until 30 September 2021 when it will increase to 12.5% until 31 March 2022. It may be worth ensuring that your systems are able to handle a VAT rate of 12.5%. Also, the scope for this reduction is only for those services when the tax point falls in this period, this may be advantageous for some businesses.

Making Tax Digital (MTD)

MTD is mandatory for all business from 01 April 2022, currently it is only those businesses whose turnover is above the VAT threshold.

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