As we head towards the end of the year, it is perhaps a good time to look back at what has been a very busy year in terms of VAT. What a year it has been!
A little thing called Brexit happened. Postponed Import VAT Accounting was introduced, a brilliant idea but poorly explained by HMRC. We lost simplifications like Triangulation – causing business in both the EU and UK equal amounts of confusion. Solutions are available but involve VAT registrations in the UK or EU, and added cost to businesses already suffering at that time with lockdown.
The Northern Ireland Protocol was also in play, but not fully understood. As we now approach the year end, both the UK and EU remain in tense talks to reflect on its implementation to date. In brief, Northern Ireland is part of the EU where goods are stored in or pass through Northern Ireland – so all the pre-Brexit rules like triangulation and EC sales list continue to exist, but only for goods. For services, Northern Ireland is very much part of the UK as it is for all other aspects of the Union.
The temporary Reduced Rate for catering and hospitality (5%) was to end by March 2021 but was extended until September 2021, a much needed relief to the sector hit hardest by the lockdowns. As Christmas approaches this sector is yet again threatened with the rise in infections of the Omicron variant and has prompted the Government to release more support.
Domestic Reverse Charge for Construction Services, after many delays and postponements, was implemented and despite this long awaited fraud measure going live, it still confused the sector and it still does 9 months later. The confusion being to get the VAT treatment right (hard enough as it is) you have to get the CIS treatment right first. Two confusing taxes reliant upon each other was always going to cause issues. If you are having difficulties implementing this then please get in touch here.
Import One Stop Shop and One Stop Shop finally go live after being delayed from January 2021. Two schemes which are similar but very different in what they aim to achieve. IOSS is optional and enhances the customer experience, OSS is mandatory if selling goods that are located in the EU at time of sale.
The temporary reduced rate for catering and hospitality changed from 5% to 12.5%, so we now have two official reduced rates.
With the influx of non-UK VAT registrations as a result of Brexit, HMRC had no mechanism to issue refunds to overseas traders with overseas bank accounts. Only UK bank accounts could receive refunds. HMRC announced in November that it was now possible to make refunds directly into an overseas bank account. A form can be downloaded via the government gateway and manually processed by HMRC. HMRC announcement link.
The calm before the storm? With further Brexit related regulations to come, with a new VAT penalty regime and of course, Making Tax Digital being extended to all VAT registered business (not just those over £85K, it seems the VAT accelerator pedal is still very firmly pressed to the metal for 2022.
If there are two messages to give as we approach the year end, the first is that VAT remains a significant risk to businesses, the penalties can be significant for non-compliance and with so many changes this year alone, the opportunity for HMRC to open enquiries into a business is more likely in the coming years.
Secondly, I wish you all a very Happy Christmas/Seasonal Greetings and have a Happy New year, and see you all in 2022. It’s going to be fun! Again!
Here to help with all your VAT queries so please get in touch directly or fill out the form below.
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