The pace of change in Indirect Tax in recent years has been relentless and 2022 should be no exception.
We are expecting developments to continue to flow from the emergency pandemic measures and the UK’s exit from EU as well as the implementation of further policy reform by the Government and HMRC. Many of these changes will impact business across the board so it is imperative that your organisation is ready for them.
We have outlined below a summary of the key forthcoming changes:
HMRC Land & Property Guidance
HMRC has been undertaking an ongoing review of the VAT treatment of supplies relating to land and property. It has recently indicated that it will publish further guidance on two key areas early in 2022:
- The first follows HMRC’s change in policy in relation to termination/compensation payments. Previously HMRC stated that it now considers that many such payments should attract VAT. Further guidance on the extent to which this applies to dilapidation payments is expected early in 2022.
- In addition, HMRC has indicated that it will publish a clarification of its view in relation to call options. Although it states that its current guidance has not changed, HMRC accepts that its position in recent litigation may have caused uncertainty and doubt.
End of the New Payments Scheme for COVID VAT deferral
The New Payments Scheme for Covid VAT deferral allowed taxpayers to pay deferred VAT payments from 2020 in interest free instalments. This scheme will therefore cease for all businesses in 2022 and will leave any unpaid amounts potentially subject to interest and/or penalties.
Read more about on this here.
1 January 2022
Full Customs declaration Controls introduced
Full customs declarations and controls will be introduced in relation to imports from the EU apart from goods imported from the island of Ireland (this concession applies while EU/UK negotiations on the Northern Ireland protocol continue). However, Safety and Security Declarations will now not be required until 1 July 2022. Businesses will no longer have the option to delay customs declarations (unless they are importing from Ireland) and should ensure they are ready for these changes and either have the in-house capability or the services of an agent to assist with this.
The BDO Customs Declaration Assessment Tool can be used to ensure the correct information is being submitted in your customs declarations by freight forwarders. From January BDO will also be offering a customs brokerage service to complete customs declarations for our clients.
In addition, pre-notification requirements for Sanitary and Phytosanitary goods will be introduced from this date although again, relevant imports from Ireland will be exempt. Read more here.
Removal of Intrastat for most UK businesses
From 1 January 2022, Intrastat declarations will only apply to movements of goods between Northern Ireland the EU (and vice versa). Therefore, the 2021 requirement for businesses in Great Britain to continue to submit Intrastat reports for Arrivals will cease.
1 April 2022
End of temporary reduced rate for leisure and hospitality.
In its Summer Economic Statement in July 2020, the government announced a number of VAT measures including a temporary reduction of the VAT rate for the hospitality, hotel and holiday accommodation sectors as well as admission to certain attractions from 20% to 5%. This VAT cut was designed to boost customer demand in response to the economic crisis caused by the Covid-19 pandemic. In the spring 2021 Budget, the Chancellor announced a second extension to the relief: the 5% rate of VAT was extended until 30 September 2021. From 1 October 2021 the hospitality sector VAT rate increased to 12.5% until 31 March 2022, after which time it is due to return to the standard rate, currently at 20%. Further information on the scope of the reduced rate is available here.
Introduction of Plastic Packaging Tax.
From April 2022, all businesses trading in the UK that use more than 10 tonnes of plastic packaging a year may need to register for and pay the Plastic Packaging Tax at £200 per ton. Although the new tax will be levied on producers and importers of plastic packaging which does not contain sufficient recycled content, the additional costs are expected to be borne across the supply chain and so users of plastic packaging should also understand the implications of PPT for them. Click here to read about the five key steps you should consider to get your business ready.
Making Tax Digital for VAT mandatory
Making Tax Digital for VAT will apply to business trading below the £85k VAT registration threshold (ie all remaining VAT registered businesses) for VAT return periods starting on or after 1 April 2022. As a result, such businesses will be required to maintain digital records of their VAT data, submit VAT returns to HMRC via appropriate software and ensure that all data is “digitally linked” throughout their VAT return process.
Notification of uncertain tax treatments
Following consultation with advisors and industry, HMRC have introduced a new requirement requiring large businesses to notify HMRC of uncertain tax treatments. The new rules apply to returns, including VAT returns, due to be filed from 1 April 2022 with the aim of improving HMRC’s ability to identify issues where businesses have adopted a different ‘legal interpretation’ to HMRC.
The requirement will only apply to ‘large businesses’ – this is broadly aligned to the current threshold tests for the Senior Accounting Officer (SAO) provisions under Finance Act 2009. Essentially, the test will be based on the £200m UK turnover and £2bn UK balance sheet test. Note that this applies to partnerships and LLPs as well as corporates, wherever incorporated. Further information is available here.
30 June 2022
Submission of delayed declarations from 2021
Certain importers up to 31 December 2021 were able to make imports from the EU using the delayed declaration processes (by concession this continues for goods imported from the island of Ireland while negotiations on the Norther Ireland protocol are ongoing). Following the import, importers have to then submit a full declaration for customs no later than 175 days later. Therefore, if a business used this facilitation on 31 December 2021, the full entry will be required no later than 30 June 2022.
Importers should ensure they are ready for these changes and either have the in-house capability or the services of an agent to assist with this. The BDO Customs Declaration Assessment Tool can be used to ensure the correct information is being submitted.
1 July 2022
Customs Duty – Safety and Security Declarations
Customs certification and physical checks will be introduced for:
- All remaining regulated animal by-products.
- All regulated plants and plant products
- All meat and meat products.
- All remaining high-risk food not of animal origin.
High-priority plants and plant products checks will transfer from place of destination to designated border control posts (“BCP”s) and control points
Live animal physical checks will take place at designated BCP where a facility is operational at the point of entry. Where there is no designated BCP, checks will remain at destination for other ports of entry until sufficient BCPs are operational. Checks at Sevington inland BCP and designated airport BCPs will commence from 1 July 2022.
1 September 2022
Customs Duty - Certification and physical checks
Certification and physical checks will be introduced for all dairy products.
1 November 2022
Customs Duty - Certification and physical checks
Certification and physical checks will be introduced for all remaining regulated products of animal origin, including composite products and fish products.
31 December 2022
VAT default surcharge regime replaced by new regime for late payment of VAT and late filing of VAT returns
The current default surcharge regime for penalising taxpayers who file their VAT returns late or who make late payments of VAT due to HMRC has long been recognised as being unfair and ineffective with many disputes around surcharges levied ending up in Tribunal. From 1 January 2023 a new regime is being introduced to make the penalty regime for late filing and payments fairer and consistent with other taxes. Additionally, there are changes relating to the interest payable and receivable by taxpayers in respect of VAT. Read more on the new rules here.
For further advice – please contact the local member of our VAT and customs team:
Visit BDO's dedicated VAT and Customs pages here.
Visit our Rethinking the region hub and read more guidance from BDO specialists in your area.