Partially Exempt businesses affected by COVID
Some partially exempt businesses have had their income massively impacted by COVID meaning that when they come to carry out their Partial Exemption calculation or Capital Goods Scheme adjustment, the figures for the 2020/21 year are massively distorted and do not reflect the true use of their inputs.
An example partially exempt businesses could be a business that rents out an opted property but has had no rental income due to having to close during the lockdown, or a theatre that actually has negative income after having to refund 12 months’ worth of show tickets.
HMRC have published a brief advising that there will be an accelerated process for affected businesses to request temporary alterations to their Partial Exemption Methods.
Where a business uses the standard, turnover based method, HMRC suggests considering the Standard Method Override in the first instance. Where that is not appropriate, HMRC can be contacted to agree to a temporary special method. Suggested calculations include basing the apportionment on last year’s figure, or an average of the last 3 years. A dedicated email address has been set up for dealing with those applications in order that they can be given priority.
Key measures from the budget on 3rd March include:
- The VAT registration threshold of £85,000 and deregistration threshold of £83,000 have been frozen until 31 March 2024.
- The temporary reduced rate of 5% in relation to hospitality has been extended to 30 September 2021, with a rate of 12.5% then applying from 1 October 2021 to 31 March 2022.
- Making Tax Digital (MTD) will apply to all VAT registered businesses, regardless of turnover, with effect from 1 April 2022.
New Penalty Regime from March 2022
Three papers have been published in relation to the implementation of the new payment regime which comes into effect for VAT Returns starting after 31 March 2022. Under the new rules, businesses will be given points for late returns and penalties will be based on the number of points accrued.
Advisory Fuel Rates
HMRC have published the Advisory Fuel Rates to be used from 1 March 2021
Issues with Postponed Import VAT Statements
Businesses which have chosen to account for import VAT using Postponed Import VAT Accounting should be able to download a monthly statement from HMRC via their Government Gateway account.
There have been numerous issues with this service including:
- statements not being available
- accessibility issues with the system
- January statements including February transactions
- lack of clarity as to which transactions relate to which month
HMRC have updated their guidance to show that businesses can estimate the amount of import VAT to account for if they cannot get the information from HMRC.
If you have any issues with Postponed VAT Accounting and statements, let me know so I can feed back to HMRC via the VAT Practitioners’ Group.
Grants to Support Brexit Advice
£20 million has been invested into an SME support scheme allowing businesses to apply for grants of up to £2,000 to help with training in relation to post Brexit cross border supplies of goods.
Certificate of Status
When making a 13th Directive claim to recover VAT incurred in an EU country, a business will need to provide confirmation that they are trading in the UK. HMRC have issued updated guidance as to how to obtain a Certificate of Status should it be required.
The long running case of Newscorp has now been heard by the Court of Appeal which has agreed with HMRC that the sale of online publications should have been standard rated. The Upper Tribunal had found for Newscorp that they were zero rated. Newscorp has sought permission to appeal to the Supreme Court so this may net yet be the final answer. It should be noted that this only considers supplies made before 1 May 2020. After that date, the legislation changed to make e-publications zero rated.
Option to Tax Time Limit
The time limit for notifying HMRC of an option to tax is generally 30 days. Due to the difficulties and delays caused by COVID, this was extended to 90 days. The 90 day period will now apply to decisions made between 15 February 2020 and 30 June 2021.
As an anti-fraud measure, changes have been announced to the reverse charge on emissions allowances. The changes take effect from 1 May 2021.
Transitional Guidance on Specified Supplies
Transitional guidance has been published explaining how to deal with certain cross border supplies of financial services which span the end of the Brexit Transition period.