VAT Update – March 2019

24 Mar 2019

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Another month goes by and still we have no end in sight to the uncertainty over Brexit. We look ahead to the anticipated next stages and summarise the publications issued by HMRC. In other news, Making Tax Digital for VAT commences on 1 April: are you ready?

Brexit and indirect taxes: it’s not over yet

In the lead up to 29 March, HMRC, in a flurry of activity, published no fewer than 13 documents covering VAT and the Customs Duty implications if the UK leaves the EU VAT and customs unions on 29 March without a deal (a ‘hard Brexit’).

We now know there will be a minimum delay until at least 12 April. A further delay until 22 May could be possible if a deal is agreed next week. However, the position becomes much more complicated to predict if the Prime Minister’s preferred deal is voted down for the third time.

Therefore, the 13 recent VAT publications listed below, in theory, apply after 12 April (subject to a further extension until 22 May), but that is potentially subject to change.

  1. VAT IT system rules and processes if the UK leaves the EU without a deal
  2. Moving goods to and from the EU using roll on roll off locations if the UK leaves the EU without a deal
  3. Register for simplified import procedures if the UK leaves the EU without a deal
  4. Customs agents – no deal Brexit
  5. Information for financial service institutions if there’s no Brexit deal
  6. VAT recovery for financial services exports in a no deal scenario
  7. Accounting for import VAT on all goods brought into the UK if the UK leaves the EU with no deal
  8. Changes to your customs authorisations if the UK leaves the EU without a deal
  9. Check temporary rates of customs duty (tariffs) on imports after EU Exit (Trade Tariff Tool)
  10. Guidance from the French customs authorities for UK businesses in the event of a no deal Brexit
  11. VAT IT system changes for the businesses outside the UK if the UK leaves the EU with no deal
  12. Prepare your business for the UK leaving the EU – Tool
  13. Communications Pack: Import VAT on parcels in the event of a no deal EU exit

Comment: Many businesses that trade internationally to/from the UK have had to make contingent plans for the UK leaving the EU on 29 March. The short delay until 12 April does little to provide certainty to affected businesses and the uncertainty is likely to continue for the present. We recommend discussing ‘hard Brexit’ contingency planning and readiness with your usual Saffery Champness contact.

Making Tax Digital for VAT: it is almost here

Making Tax Digital for VAT (MVD) will come into force on 1 April. If you have not taken any steps to check the requirements and determine what needs to be done, there is still time, but we would strongly recommend taking action soon.

If your business is VAT registered and makes taxable supplies above the VAT registration threshold of £85,000 in any 12 months, MVD is likely to apply. There is a six month deferral from 1 April until 1 October for a small number of large or complex businesses.

You can find out if you are eligible to be deferred here

For affected VAT registered businesses, MVD requires that VAT returns, for VAT return periods commencing on or after 1 April 2019, are submitted by digitally enabled software. The normal nine boxes of information required to submit a VAT return will remain the same, but can no longer be submitted through HMRC’s online portal for those businesses affected.

For businesses submitting VAT returns on calendar quarters, the first VAT return that will be affected will be due to be filed no later than early August 2019.

Therefore, for many businesses affected by MVD, there is still time to investigate software options for complying with MVD, as having compliant software is key. It may be the case that you can update your existing accounting software or, alternatively, purchase ‘bridging software’. Most bridging software allows VAT return information to be submitted using an enabled spreadsheet template that is completed with the nine boxes of information currently required when submitting a VAT return. The bridging software then allows the VAT return to be submitted to HMRC.

The key point here is that if you have not looked into MVD and how it affects your business previously, now is the time to take action.

Comment: MVD is almost upon us. For those businesses that have not taken any steps to get ready, we would highly recommend contacting your usual Saffery Champness contact to discuss your options. Some businesses have opted to sign up for MVD early, but there are consequences to taking such a step before you have submitted and paid any VAT due on your final VAT return before MVD starts. Advice should be sought.

Extension of VAT Grouping: not here just yet…

The extension of the VAT grouping rules was expected to be introduced shortly after Royal Assent of Finance Bill 2019, but it has been further delayed. Royal Assent was given on 12 February, but we will now need to wait until September or October 2019. The extension of the rules will see individuals and partnerships able to form VAT groups with their controlled corporate companies.

For advice regarding any of the issues raised here, please speak to your usual Saffery Champness partner.