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The Spring edition of The VAT Bulletin is here! This time, Richard Staunton, VAT partner at Gerald Edelman, shares updates from both our VAT team as well as the external VAT world, including the surprise zero-rating of energy-saving materials and the new Plastic Packaging Tax. To receive our bi-yearly update via email, subscribe to our mailing list below.
A lot has happened both in the Gerald Edelman VAT Team and in the VAT world. As you will read below, the team has expanded and now includes Luke Webster as Associate Director. Luke brings a great deal of experience and technical ability to the team and has an interest in not for profit which is very welcome as this area can be complex from a VAT perspective.
In the wider VAT world, the big news is the surprise zero-rating of energy-saving materials. I feel that this is bigger than the actual change. While the application may be limited, this new legislation is a real break with the EU. The UK was not allowed to apply the reduced rate across the board in this area, indeed it was subject to infraction proceedings and had to restrict the application to a certain part of the population. In addition, the zero rates could never have been considered when bound by EU law.
While this may sound like a positive for leaving the EU, it is not a one-way street. For example, the VAT and land exemption is currently part of an HMRC review with one outcome that all land is taxable rather than exempt, again something that could not have been changed when in the EU.
We should expect a number of changes in VAT law as we diverge from the EU, some good and some not so good!
Meet Luke Webster
We welcome our newest recruit, Luke Webster. Luke joins the team as an Associate Director and brings over 10 years of private practice experience with him. Luke specialises in place of supply, not for profit entities and land and property and will be focused mainly on supporting the VAT partner on the more complex projects.
From 1 April 2022 until 31 March 2027, the installation of energy-saving materials into residential accommodation will be zero-rated, after this time they will revert to 5%.
The supply of energy savings materials, with no installation, will continue to be standard-rated. If these goods are supplied with their installation then they will be zero-rated. This change does not apply to Northern Ireland who remain under the old system.
In the old system, i.e. prior to 1 April 2022, the installation could be at the reduced rate if the recipient was over 60 or in receipt of certain benefits e.g. Child Tax Credit, and, in most other cases, provided the cost of the materials was less than 60% of the installation contract.
Installation means putting in place, the goods must be supplied with the installation, this means by the same supplier.
However, if the energy-saving materials are supplied with other building work, they cannot be apportioned and the VAT at the standard rate may be applied to the whole contract. However, if the predominant supply is one of the installation of energy saving materials, all work may be zero-rated even if there are minor standard-rated works being carried out as well.
These are the types of materials that are considered to be energy-saving:
- controls for central heating and hot water systems
- draught stripping
- solar panels
- ground source heat pumps
- air source heat pumps
- micro combined heat and power units
- wood-fuelled boilers
A new tax, the Plastic Packaging Tax (PPT) came into force on 1 April 2022 in the UK.
Businesses must register for PPT if they have manufactured or imported 10 or more tonnes of plastic packaging within the last 12 months (“backward look”), or if they plan to do so in the next 30 days (“forward look”).
This includes non-resident taxpayers who import finished plastic packaging into the UK on their own behalf or manufacture finished plastic packaging in the UK.
HMRC says that PPT is intended to ‘offer a clear incentive for businesses to reuse and recycle more plastic products and divert it away from landfill’.
If your business manufactures or imports plastic packaging, then this tax is likely to affect your business. The tax will apply to plastic packaging that does not contain at least 30% recycled content. It is intended to encourage and improve the use of recycled plastics.
Products that qualify for the tax will be charged £200 per metric tonne of plastic used in packaging. If a business manufactures or imports 10-tonne or more, they will be required to register for the new tax – even if all they use is recycled plastics.
In order to support the use of recycled plastics, and therefore pay no PPT, a business is required to keep detailed records for the whole supply chain to evidence this as well as records to show how you have calculated the PPT due on each quarterly return. These records must be kept for six years.
All businesses within the supply chain must also keep detailed records as they may be secondarily liable or jointly and severally liable for the tax.
HMRC has published a collection of guidance, which is updated on a regular basis, so it is advised that businesses refer to their page to see the most recent information on Plastic Packaging Tax.
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