Author: Ketan Umretiya

The coronavirus VAT payment holiday gave businesses the chance to defer the payment of any VAT liabilities between 20 March 2020 and 30 June 2020. The option for businesses to defer their VAT payments ended on 30 June 2020.

There are two options available for repaying this VAT.

• The first option is to pay the deferred VAT in full on or before 31 March 2021. No interest or penalties will accrue on deferred payments that are paid by the new due date and there is no requirement to contact HMRC.
• The second option is to further defer the amount of VAT due. The VAT deferral new payment scheme will allow businesses the option to pay the deferred VAT in smaller payments over a longer period. Instead of having to repay the full amount by 31 March 2021, businesses will now be able to make smaller interest-free payments during the 2021-22 financial year and thus complete payment of the VAT due by 31 March 2022. 

HMRC has now confirmed that the VAT deferral new payment scheme will be open from 23 February up to and including 21 June 2021. Nearly all businesses are expected to use HMRC’s online service to sign up. VAT registered businesses will need to opt in to the scheme and will not be able to use an agent to do this.

The new scheme will allow businesses to pay their deferred VAT in instalments without adding interest and select the number of equal monthly instalments from 2 to 11 (depending on when they join the scheme). Businesses will need to sign up by 19 March 2021 to benefit from the maximum number of instalments. Businesses must also meet certain conditions to use the scheme including being up to date with their VAT returns.

Anyone using the VAT Annual Accounting Scheme or the VAT Payment on Account Scheme, will be invited to join the new payment scheme later in March 2021.

Source: HM Revenue & Customs Wed, 17 Feb 2021 00:00:00 +0100

The process for working out the VAT treatment of delivery charges can be quite complex.

We have listed below some of the main issues to bear in mind when deciding whether or not VAT needs to be applied.

• No charge for delivery. HMRC’s guidance is clear that if delivery is free, or the cost is built into the normal sales price, VAT is accounted for on the value of the goods based on the liability of the goods themselves. This applies whether or not delivery is required under the contract.
• Goods on approval. Where you are delivering goods on approval this service is not classed as delivered goods. In this case, the delivery service is a separate VATable supply.
• Additional charge for delivery.  There is a single supply of delivered goods for which the VAT liability is based on the VAT liability of the goods.
• Delivery is not required. If delivery is not included in a contract to supply goods, then the delivery charge is liable to VAT at the standard rate irrespective of the VAT liability of the goods supplied. This assumes the delivery is within the UK.
• Separate charge for packing. A separate packing service for which a charge is made will be standard-rated within the UK.
• Food deliveries. The rules as to whether VAT is payable on delivery charges for food follows the VAT liability of the food. For example, the supply of hot takeaway food is usually standard-rated for VAT and a delivery charge would also be subject to VAT.

Where there is a mix of zero-rated and standard-rated items delivered, or where goods are delivered internationally, the situation can be more complex and further attention may be required.

Source: HM Revenue & Customs Wed, 09 Dec 2020 00:00:00 +0100

Where an error on a past VAT return is uncovered, businesses have a duty to correct the error as soon as possible. As a general rule, any necessary adjustment can be made on a current VAT return. However, in order to be able to do so, there are three important conditions that must be met:

1. The error must be below the reporting threshold.
2. The error must not have been deliberate.
3. The error can only relate to an accounting period that ended less than 4 years ago.

Under the reporting threshold rule, businesses can make an adjustment on their next VAT return if the net value of the errors is £10,000 or less. The threshold is further increased if the net value of errors found on previous returns is between £10,000 and £50,000 but does not exceed 1% of the box 6 (net outputs) VAT return declaration figure for the return period in which the errors are discovered.

VAT errors of a net value that exceed the limits for correction on a current return or that were deliberate should be notified to HMRC using form VAT 652 (or providing the same information in letter format) and should be submitted to HMRC's VAT Error Correction team.

HMRC can also charge penalties and interest if an error is due to careless or dishonest behaviour.

Source: HM Revenue & Customs Wed, 09 Dec 2020 00:00:00 +0100