The VAT Bulletin: November 2021

The November edition of The VAT Bulletin is here! In this edition, Richard Staunton shares key insight into the VAT landscape including EU and UK news, common issues his clients are facing, and a short survey to understand areas of confusion to help guide the advice we provide.

Editors message

This is the second VAT bulletin we have produced and thankfully there isn’t anything about VAT changes on Brexit!

The VAT rules for post-Brexit have probably bedded in now, although we still have a number of queries, particularly on cross-border triangulation. Hopefully, these will gradually reduce as businesses get familiar with all the new rules and processes.

The Autumn Budget and Spending review revealed few changes to VAT, however, there are likely to be bigger changes on the horizon. I have said for a while now that I expect the UK VAT system will change quite a lot over the next few years partly because of the need to raise revenue and partly because the UK is no longer bound by EU directives. I do expect a narrowing of VAT exemptions, as well as a big change in registering for VAT.

I think it’s fair to say that the world of VAT will keep changing, at least in the short term. We will continue to update via bulletins, but for the latest news please visit the firm’s website or follow us on LinkedIn.

Reduced rate on hospitality and tourism sector until 31 March 2022

The reduced rate for hospitality supplies is now 12.5% until 31 March 2022 when it will revert to 20%. It would be worth considering asking customers for advance payments or raising invoices prior to the rate change to ensure that VAT is declared at the old rate where possible.

Default Surcharge withdrawal

HMRC have announced that the default surcharge regime will be withdrawn, and a new points system will be introduced for late submission of VAT returns; on reaching a certain number of points, a penalty of £200 will be charged.

A late payment penalty will also be introduced. Interest will also be charged for payments made more than 15 days after they were due.

It is anticipated this will be introduced from April 2022.

HMRC Delays

There are significant delays in many VAT processing teams across HMRC, in particular, this is affecting the Option to Tax unit (OTTU), Group VAT Registration and amendments to your VAT details.

To reduce the problems this can cause, we recommend keeping copies of any e-mails sent to the OTTU, including their acknowledgement e-mail as evidence you have notified HMRC of any option.

If you can amend your details using your online account, please do so. We are happy to help if you are unsure how to set it up.

VAT and services to non-UK customers

We are often asked if VAT should be charged on supplies of professional services (accountancy, consultancy, lawyers and similar). If the customer belongs in the UK, the place of supply is deemed to be the UK. VAT will normally be due at the standard-rate (currently 20%). However, if the customer, B2B or B2C, belongs outside the UK then no VAT should be charged as the service is considered to be made where the customer belongs and as such is outside the scope of UK VAT. Any VAT relating to these types of supplies should be recoverable.

Revenue and Customs Brief (RCB) 4; partially exempt VAT registered businesses affected by Coronavirus (Covid 19)

This RCB was released in March 2021 but has not been widely publicised.

The brief outlines how partially exempt businesses who have changed business practices due to coronavirus can apply for temporary alterations to their partial exemption methods if the result is no longer fair and reasonable.

HMRC advise that they will be using an accelerated process to consider these changes in method and will approve them swiftly if satisfactory.

The same process will be available to those who use the Capital Goods Scheme (CGS) to calculate input tax recoverable on capital items used for taxable and exempt purposes.

If you have any questions surrounding anything covered in this newsletter, please contact our VAT team today.

We have found that while the RCB seems to be reasonable in practice HMRC does not seem that generous, although it is still quite early in the process and hopefully in the cases, we are dealing with we can obtain favourable outcomes