With 2021 serving primarily as a period of legislative transition, in 2022 UK VAT policy is most definitely moving forward. Here are some of the immediate changes already on the horizon for VAT.
Extension to making tax digital (MTD)
Most taxpayers already file VAT returns via an MTD software interface along with maintaining digital records. The first phase of MTD for VAT was launched with effect from 1 April 2019 and applied
to all businesses with turnover exceeding the VAT registration threshold of £85,000.
From 1 April 2022, MTD for VAT will apply to all VAT registered businesses including those voluntarily registered for VAT still trading below the threshold. This will include many small business owners, selfemployed consultants, property landlords, farmers and other professionals.
Any small business yet to implement MTD for VAT should prepare their accounting systems now in order to ensure a smooth first filing on their next relevant VAT return. Now is the time to consider moving from a spreadsheet-based bookkeeping system to either a fully MTD-compliant integrated cloud-based package or investing in Excel bridging software.
New penalty regime
From 1 April 2022, a new points-based penalty regime was due to apply to late statutory VAT filings and payments. HMRC has recently announced, however, that this will now be delayed until 1 January 2023.
For late filings, penalties will be levied under a points-based system. HMRC will allocate one point for each missed submission. Points are then kept on file for two years. A £200 penalty is applied when
the total number of points reaches the relevant threshold – five for monthly returns, four for quarterly returns or two for annual returns.
For late payments, HMRC will levy penalties in two stages, with fixed penalties for payments up to 30 days late plus daily penalties for late payment thereafter.
Now more than ever, perceived insufficiency of funds should not deter a taxpayer from at least filing. More importantly, businesses anticipating difficulty paying a VAT liability should strongly consider seeking
a ‘time to pay’ agreement with HMRC. The most favourable terms are more often achieved when professional advisors intervene, and any support is a more than worthwhile investment when working
carefully out of a crisis.
Full customs controls, origin rules and intrastat
Full customs controls took effect from 1 January 2022 for all goods moving between Great Britain from the EU (excluding Ireland). Therefore, taxpayers can no longer delay making customs declarations under the staged customs controls rules that applied during 2021. That simplification has ended.
This means that the previous customs declaration deferral window of up to 175 days no longer exists. So full customs declarations are now required to be submitted before goods can be released into
free circulation.
However, a simplified declarations authorisation can be granted by HMRC. This provides for goods to be released directly to a specified customs procedure upon arrival under certain circumstances, or some
businesses may decide to use a customs intermediary to act on their behalf.