Spreading Awareness About Changes in Vat and other indirect taxes

Things rumbled unanimously in the finance sector in the eventful year of 2020, but there hasn’t been any great update in 2021 so far in the indirect taxes. In 2020, VAT payment deferrals and reductions were made for the leisure and hospitality sector that was mostly driven by the outrageous pandemic. Still, there aren’t any significant changes in HMRC’s policy that incorporate guidance in the recovery of import VAT and a dynamic approach to post-Brexit customs penalties.

Nevertheless, your enterprises should be ready for wide-ranging reforms that will impact your businesses across the boards.

VAT Update:

HMRC issued a short note for updating the new policy on 25th January 2021. The new policy is all set out in revenue and custom briefs that is yet to be implemented, as it is pushed to a” future date.” It clarifies that the businesses can continue with the new policy or apply the previous compensation payment treatment as per their convenience.

Opting Digital platform for VAT: Digital links

The taxpayers need to implement digital links through their respective systems as a part of the next stage of Making Tax Digital. This will create an unbreakable electronic chord of data from the accounting system to the VAT return.

The digital links have been defined as the source of VAT information transfer from one software to another. This could make your accounting system; sales purchase ledger reports with automatic extraction to your calculation tool.

The temporarily reduced VAT rate for leisure and hospitality to come to an end

The trend from 1st October up to 1st April 2022 concludes the reform of a five per cent reduction in the leisure and hospitality sector introduced to assist businesses that became victims of social distancing measures affecting their business revenues and gains. The temporary change will be invalidated after 31st March 2022.

From 1st October, there will be a transitional increase in the VAT rate to 12.5 per cent that will finally return to 20 per cent from 1st April 2022.

Government’s approach on VAT reform:

The Government of the United Kingdom is relying on various consultations on a number of areas that include:

• A newer vision towards a ‘sharing economy’.
• Recovery regime for VAT in compliance with the public sector.
• Update on uncertain tax regimen for large businesses.
• Rethinking on Shifting value to pay more consideration between attracting varieties in the VAT liabilities.

FinConcile helps small firms with outsourced accounting services in the UK in order to facilitate accuracy in financial data and bring functionality in core activities.