Feb 19, 2020 | VAT

VAT Update 2021

We hope this finds you safe and healthy, and whilst businesses continue with the challenges of COVID19, there are a number of changes that affect businesses that have already had an impact or are coming in soon and therefore preparation is key. We have therefore included a roundup of the changes in relation to VAT:

Domestic Reverse Charge for the Construction Industry
Brexit & VAT
Making Tax Digital Expansion
Pay Deferred VAT due to coronavirus (COVID19)

Domestic Reverse Charge for the Construction Industry

The CIS VAT domestic reverse charge measure will apply to supplies of construction work from 1 March 2021. The measure was due to commence in October 2019 and has been delayed twice due to Brexit and the Coronavirus, but there is no sign of a further delay at this point in time.

The aim of the measure is to reduce VAT fraud in the construction sector.

The charge applies to standard and reduced-rate VAT services:

for individuals or businesses who are registered for VAT in the UK reported within the Construction Industry Scheme – this is includes all subcontractors regardless of if they receive payments gross or net of deduction.

The charge makes it the responsilbity of the last supplier in the chain of construction services to pay over the VAT for all supplies in the chain.

More details can be found here: DRC

Please let us know if you have any questions on the above and how it may affect your business and if need assistance setting up your accounting software and invoices so you are ready for the 1st March 2021.

Brexit & VAT

As the Brexit transition has now ended, businesses in the UK and EU face a number of VAT issues.

The EU VAT rules will not change, if a particular transaction is deemed to arise in a given location under EU rules then under EU rules this will remain the case. A UK business with a VAT liability elsewhere in Europe will still need to take steps to remain compliant with local VAT rules.

There are changes in relation to:

– Goods
– Importing & Exporting
– Distance Selling
– Supplying Services to the EU
– Digital Services
– Goods entering the UK as parcels
– EC Sales List – EU VAT refund System

More details can be found here: Brexit & VAT

More information can be found at: This is a complex area and if you have any questions or concerns in relation to VAT and Brexit, please do not hesitate to let us know.

Making Tax Digital Expansion

The initial phase of MTD required VAT-registered businesses with a taxable turnover above the VAT threshold (£85,000) to follow the Making Tax Digital rules by keeping digital records and using software to submit their VAT returns.

Making Tax Digital (MTD) for VAT Phase 2 will apply from 1 April 2021, where the digital links mandate will mean businesses cannot manually transpose i.e. cut and paste data and they’ll need to evidence their compliance from source to report.

More Details can be found here: MTD

If you would like to discuss your process and record keeping then please give us a call to discuss. Making Tax Digital currently applies to VAT registered business with a turnover over £85,000 but is being extended to all VAT registered businesses starting from 1st April 2022, therefore if you are not currently using MTD compatible software or want to discuss your system in relation to digital links to ensure you are ready, then please give us a call to discuss.

Pay VAT deferred due to coronavirus (COVID19)

If you deferred VAT payments due between 20th March and 30th June 2020 and haven’t yet paid it over to HMRC, there are three options available:

– pay the deferred VAT in full, on or before 31 March 2021
– join the VAT deferral new payment scheme – the online service is open between 23 February and 21 June 2021
– contact HMRC on Telephone: 0800 024 1222 by 30 June if you need extra help to pay You may be charged interest or a penalty if you do not make a full payment by 31st March 2021, opt into the scheme by 21st June 2021 or contact HMRC to agree extra help by 30th June 2021.

For more information on the VAT deferral new payment scheme: VAT

If you need any assistance, please do not hesitate to get in touch.

This information is current as of February 2021 and is subject to change without notice. The information within this newsletter is intended as a guide and individual circumstances may differ and you should seek professional advice before taking any actions.

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