Weekly VAT News

Indirect tax news from the past week

02/08/2021

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VAT payment deferral – penalties

HMRC have updated their guidance on VAT deferred due to coronavirus to confirm the penalty regime that applies if the VAT deferred on payments due between March and June 2020 was not paid in full or a payment arrangement was not made by 30 June 2021. An arrangement to pay could include either joining the VAT Deferral New Payment Scheme (to make instalment payments) or entering into an agreement to pay with HMRC. The penalty will be charged at 5% of the deferred VAT unpaid when the assessment is made, and the penalty must be paid within 30 days of the date of the assessment. (Contact: Adam Routledge) 

Plastic Packaging Tax – Guidance updated

The Plastic Packaging Tax (PPT) is due to come into effect from 1 April 2022 and is likely to affect a wide range of businesses in supply chains involving the manufacture or importation of plastic packaging materials. On ‘L day’ on 20 July 2021, when draft clauses for the Finance Bill were published, HMRC also updated the guidance on how businesses can start preparing for the introduction of PPT to include details of packaging components that are not subject to PPT, and issued a technical consultation (open until 17 August 2021) on draft statutory instruments necessary for the implementation of PPT. HMRC have indicated that further guidance will be issued before the introduction of the tax. Nevertheless, based on the information already available, businesses can use the lead time to the implementation of the tax to determine their PPT registration and reporting requirements (including access to the information necessary to comply with the rules) and to consider the implications of the tax and associated costs for their supply chains. (Contact: Zoe Hawes) 

Research reports – MTD and online sellers

Also on ‘L day’, HMRC published research reports on Making Tax Digital and UK tax compliance by Chinese online sellers. The research for the Impact of Making Tax Digital for VAT report involved more than 2,000 interviews with businesses that submit VAT returns under MTD. The report considers the extent to which MTD has achieved its objectives, and its costs and benefits, which generally corelate to the extent a business was already using (and comfortable with) technology prior to the introduction of MTD in April 2019. The report on Knowledge and attitudes of online sellers in China to UK tax compliance is based on 30 interviews with Chinese businesses selling goods online to the UK. Amongst the findings were that HMRC should share information in Chinese, and the importance of external agents and shipping and fulfilment services to business processes. (Contact: Andrew Clarke

Office of Tax Simplification – Annual report

The OTS has issued its Annual Report 2020-21. VAT issues covered in the report include responses to recommendations in the OTS’s VAT review of November 2017, namely, the announcement by HMRC in March 2021 of simplifications to the process for applying for a partial exemption special method, and an HMRC consultation launched in May 2021 on the VAT land and property exemption. The OTS is holding a webinar from 2.00 to 3.00pm on Wednesday 15 September to highlight key areas of its work. For further details and registration, see here.