Get ready for 12.5% VATMost supplies made by the hospitality industry will carry 12.5% VAT from 1 October 2021.Some businesses will have to deal with four rates of VAT in their accounting systems from 1 October 2021.This has not happened since 1979 and will hopefully not happen again after 31 March 2022 when the temporary 12.5% rate for most sales made by the hospitality industry will end and the 20% rate will resume on 1 April 2022. We will then be back to three VAT rates: 0%, 5%, and 20%.Affected supplies
In a nutshell, the supplies made by the hospitality industry that have been subject to 5% VAT since July 2020 will become liable to 12.5% VAT for the period between 1 October 2021 and 31 March 2022.

There is a certain kind of tax relief that is intended for import VAT and it is known as the Low-Value Consignment Relief (LVCR). With the implementation of LVCR, UK businesses are not obliged to pay for import VAT if the value of the shipment is less than £15.

UK residents who are trying to dispose their UK residential property should be aware of the new rules which requires them to report and make a payment for their CGT (Capital Gains Tax) liability with a 30-day period of completion. This comes as a shock to many people. In fact, during the last six months of 2020, HMRC issued fines to approximately 13,113 people who failed to meet the new deadlines. The total fines amounted to more than £1.3m.

HMRC will have to examine closely the coronavirus support provided to accountants and their clients. In this connection, Elizabeth Whiteley provided a summary of the guidelines and what could be the possible sanctions given to accountants and their clients if they want to take advantage of the SEISS (Self-Employed Income Support Scheme).

Things to Remember about VAT Deferrals

During the pandemic, most businesses need some support. That is why VAT payments that were supposed to be paid between March 20, 2020 and June 30, 2020 were instantly deferred. All in all, the VAT payments that were deferred amounted to a total of approximately £33.5bn.

Within the deferral period, businesses were not obligated to make any VAT payments. Rather, they were informed that the deadline for paying these liabilities that have accumulated is until March 31, 2021. But later on, it was changed. Instead of paying the whole amount at the end of March 2021, they are launching a new payment scheme which allows the businesses to further defer their payments.

What are the Options of Businesses in Paying for Their Deferred VAT?

When it comes to the repayment of deferred VAT payments, businesses are given three choices:

• They can choose to pay the full amount of the deferred balance.
• Or they can register to the new payment scheme.
• For businesses who need more time to pay, they can get in touch with HMRC and ask for an extension.

Furthermore, businesses should be aware that these options have two relevant deadlines.

• First of all, businesses who are interested in applying for the new payment scheme can only sign up until June 21, 2021. Hence, if you are one of those businesses who wants to extend your repayments further, then you should sign up on this date.
• On the other hand, to avoid any penalty, businesses should either pay the full amount of their deferred VAT or get in touch with HMRC and arrange for an extension of the payment which should be done by June 30, 2021.

What Will be the Penalties Imposed on Businesses?

The surcharge that is usually imposed for late payment of VAT may not be applicable in deferred VAT balances. Instead, a new penalty is created to specifically address unpaid deferred VAT. This is clause 99 and Schedule 19 of Finance Bill 2021. Presently, it is still on its way through the House of Lords.

In case businesses did not choose to pay in full, or apply for the new payment scheme or request for an alternative arrangement by June 30, 2021, then they will have to pay the penalty of five percent of their deferred VAT balances.

Did you find it confusing? Well, it actually means that the original deferral VAT payment scheme was to pay the full amount by March 31, 2021. However, the payment for deferred VAT balances was extended to June 30, 2021 or an arrangement could be made with HMRC to extend the payment.

How Does the New Payment Scheme for VAT Deferral Works?

With the new payment scheme, businesses can pay their VAT deferred balance in monthly instalments without any interest. Taxpayers can even choose the number of monthly instalments that they want to avail up to a certain level. However, they have to ensure that all of these instalments will be paid by the end of March 2022.

The maximum number of monthly instalments that can be availed by businesses will depend on the time that they have participated on the new scheme. However, the maximum number of instalments that can be availed by those businesses who have not applied for the scheme will be eight.

The first instalment should be paid right at the time that the business has joined the scheme. Furthermore, HMRC requires that succeeding payments should be paid in consecutive months.

It was in February this year that the applications for the new payment scheme were launched and it will end on June 21, 2021. Businesses can apply as long as their VAT returns are up to date. Also, they should be capable of paying through direct debit. This is because you will need a direct debit to set up your account. Businesses must do this by themselves since agents are not allowed to do this on their behalf.

Before businesses can take advantage of the new payment scheme, they must do the following first:

• Businesses must have their own account in the Government Gateway, if they don’t have any, then they should create one;
• The last four years of their outstanding VAT returns must be submitted;
• Mistakes on their VAT returns must be corrected immediately;
• Determine the number of monthly instalments that they want to make;
• Ensure that they are aware of the amount they owe, including the amount they have already paid and how much they originally deferred.
• Finally, they should be prepared in making their first instalment payment.

There are instances wherein businesses are interested in participating in the new payment scheme, however, there are circumstances that prevent them from using the online service. For instance, they can’t pay using direct debit, or they don’t have a UK bank account, or their account requires dual signatories. If this is the case, then they should immediately contact the COVID-19 helpline.

What Should Businesses Do Right Now

Businesses should decide right away in case they have outstanding deferred VAT balances. Whether they will consider signing up with the new payment scheme which will end on June 21, or pay HMRC with the full amount until the end of June. However, if they miss the deadline, or the business is unable to apply for the new scheme, perhaps due to their outstanding VAT returns, then they can still avoid the penalty by getting in touch with HMRC as soon as possible. They must do this before or on June 30 so they can discuss any other possible payment options. With More Than Accountants being your VAT Accountant saving you loads on Tax.

In order to streamline the processing of those who are making claims under the coronavirus job retention scheme (CJRS), specifically for 16 to 99 employees, HMRC has come up with a time-saving template. Unfortunately, for some people, the arrival of the template is a bit too late. 

As a business owner, you might be having some difficulty in understanding VAT, regardless if you already have some experience of it. If it is your first time to register for VAT, then its worthwhile to consider its effect on your pricing.

The new Recovery Loan Scheme (RLS) is part of the government’s announcement during the March 2021 budget. It’s goal is to offer financial support to UK businesses so they can recover, restart, and develop. This could be a real lifeline, most especially for independent and small businesses.

As a taxpayer, you should be aware of the latest phishing scam that you might discover on your inbox. This is in connection with the fourth SEISS (Self-Employed Income Support Scheme) grant that is recently opened for claims.