• Date

    28 Jan 2022
  • Category

    Tax, VAT & Indirect Tax

Indirect tax: what you need to know

As we emerge from the dark, damp, and chilly grip of Winter into the bright, warm, refreshing season of Spring, we wanted to align the change in season with a recap of some of the VAT and customs and excise duty changes which will inevitably impact UK businesses.

We intend to highlight changes which are in place Now, some which you can expect Next and others which you can anticipate Later in the year.

Now…

VAT

From 1 January 2021, the UK implemented the ‘Postponed VAT Accounting’ (PVA) regime which allows businesses to import goods into the UK without having to pay over any import VAT amount.

Prior to PVA, this import VAT payment would trigger the production of a paper certificate – a form C79 – which would be posted to the VAT address of the importer, and which would allow the business to recover that import VAT as input tax. With PVA, the VAT amount is reported to HMRC at the time of the import and then a digital, online, monthly, certificate is produced which allows the business to ‘pay’ the VAT by entering it in box 1 of the next VAT return, but also recover that same amount by entering it in box 4 of the same return. The net value is reported in box 7. This can be a major cashflow saving for businesses which import goods.

Customs & Excise Duty

From 1 January 2022, the UK introduced its 2022 updated integrated tariff which incorporates the World Customs Organisation changes. It is important for businesses to review the commodity codes they have been using to ensure that they align with the updated commodity codes in the 2022 tariff.

At the same time, the Goods Vehicle Movement Service (GVMS) was also introduced. For hauliers and carriers moving goods through UK ports which use the GVMS system, this meant that they had to register for the system or face the possibility of not being able to clear goods through customs controls. 

Next…

VAT

From 1 April 2022, there will be an extension of the ‘Making Tax Digital’ process for VAT registered businesses. This move will now bring into the fold all VAT-registered businesses, regardless of their turnover, whereas previously it was restricted to those with income over the VAT registration threshold of £85,000 per year. There are still exemptions that can apply, such as age, religious beliefs, access to broadband, or any other reasonable grounds that HMRC might consider.

If no such exemption applies, then business users will be expected to:

  • keep their records digitally (for VAT purposes only)
  • provide their VAT return information to HMRC through Making Tax Digital compatible software

Customs & Excise Duty

From 1 April 2022, the UK will introduce a new Plastic Packaging Tax (PPT). This tax will apply to plastic packaging manufactured in, or imported into the UK, which doesn’t contain at least 30% recycled plastic. On the plus side, there will be some exemptions for manufacturers and importers depending on their supply chain and business activity. However, many businesses will still need to register and report for PPT purposes, even if the tax isn’t levied.

Red diesel users will be affected by changes to the entitlement to use red diesel and rebated biofuels which is due to be introduced from 1 April 2022. These changes are intended to restrict the future use of red diesel and rebated fuels in many business sectors. The entitlement to use both will be restricted to specific qualifying measures, which can include vehicles and machinery used in agriculture, horticulture, fish farming, forestry and for heating and electricity generation in non-commercial premises. If your business activity doesn’t fall under the qualifying measures your duty costs are likely to increase.

Later…

VAT   

HMRC has been consulting for a few years with businesses and business advisors on the VAT treatment of EV (Electric Vehicle) charging, and how to distinguish between public and private charging and business and private use of electric vehicles that have been recharged. The position relating to public charging points is that the standard-rate of VAT would apply to any charges for these, whereas the reduced rate (5%) would apply to chargers in domestic locations. The VAT charged at public or business locations can be recovered as input tax by the business (and apportioned to reflect any business: private use) but not the VAT incurred on domestic charging. As part of the UK Government’s ambitions to create a greener environment and reduce the dependence on fossil fuels there are going to be phased announcements on issues such as the requirements for smart charging meters to be installed in domestic and business locations from 30 June 2022.

Customs & Excise Duty  

From 1 July 2022, businesses can anticipate several changes when importing goods into the UK from the EU. These include the introduction of full safety and security declarations and a requirement to have certificates in place for certain animal, plant, and high-risk foods, in addition to physical checks on some of these products at designated Border Control Points.

From 1 September 2022 and then 1 November 2022, businesses can expect further changes which will impact certification and physical checks for dairy products and other regulated products of animal origin, including some fish products.

We urge businesses to take the time Now to consider and review the changes which may affect their businesses Next and take steps to ensure that they have measures in place to prevent supply chain disruptions Later in the year.

If you think you may be affected by any of the changes discussed above and you would like further details or to discuss your supply chains, please get in touch with your local Azets advisor or directly contact Lucy Sutcliffe, Partner and Head of Customs Duty or Greg Mayne, Director VAT.

 

About the author

Lucy Sutcliffe Photo

Lucy Sutcliffe

Partner | Head of Customs Peterborough
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