VAT Legislative Changes 2022
Posted on 14th January 2022 at 13:01
VAT Returns April 2022 - New Penalty System
The default surcharge system for late VAT payments will end on 31st March 2022 and will be replaced with a new points-based penalty system. The new system is intended to be a fairer approach for those who occasionally miss deadlines, but it is designed to crack down on those repeat late offenders.
How the new system will work
Points will be accrued for late return submissions with penalties incurred once the points threshold has been reached.
Under the new system you will not be charged penalties until more than fifteen days late with your VAT payment (a two-week grace period). The penalty charge will then be 2% of the unpaid tax, with a further 2% penalty charge applied (totaling 4%) for any VAT still unpaid after thirty days.
The new system does take effect for VAT periods beginning on or after 1st April 2022, meaning if you have return periods ending, 30th April or 31st May 2022, then the current system will still apply.
. ♦ NOTE - Interest will be charged by HMRC on any tax paid late with the new system, including tax which is subject to a time-to-pay agreement. This will be payable on tax outstanding after the due date for a VAT return.
The current default surcharge system allows you to make one late VAT payment in a twelve-month period, in which the system will issue a surcharge liability notice (a warning notice as oppose to a penalty). However, if you are one day late with your next VAT payment, then this will result in a 2% penalty in most cases. Late penalties then escalate to 5%, 10% and 15% for subsequent VAT return defaults.
Tourism, Hospitality & Leisure - VAT Rate April 2022
During the Covid-19 pandemic the government introduced a series of VAT reductions for these business sectors. However, from the 1st April 2022 the current VAT rate of 12.5% for these business sectors will return to 20%, the full VAT rate.
Extension of MTD for VAT - April 2022
The Making Tax Digital scheme (MTD) which requires businesses to keep digital records and to use third party software to submit tax returns, will apply to smaller businesses from April 2022.
VAT-registered businesses with a taxable turnover below £85,000 will be required to follow the Making Tax digital rules for the first return starting on or after 1st April 2022.
Businesses with turnover below the VAT threshold can voluntarily join the Making Tax Digital service.
⚠ VAT tends to create compliance issues. In order to mitigate and to become more efficient, effective in getting your VAT returns right, then automation and cloud bookkeeping systems are key in capturing digital information, such as expenses and invoices.
Please get in touch with us to enquire further and for more information about our digital accountancy software platforms we have to offer:
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