HMRC have announced a reform of the current penalty system regarding late submissions of VAT returns and late payment of VAT liabilities. Instead of an automatic penalty being applied, points will be accrued depending on the error involved and once points have accumulated a financial penalty will then be imposed.
This will come into effect starting April 2022. Under this new system, traders will receive a point for every submission/payment deadline missed and once a pre-determined points threshold has been reached a penalty of £200 will be applied. We will learn more over the coming months.
You have until the 30 June, either using the online service or by speaking to HMRC, to set up a payment plan to cover any deferred VAT.
The full amount of deferral will have to be paid. The first instalment is due when you join and all future instalments must be paid by direct debit. If you wish to make use of the maximum period you need to register for the Time to Pay arrangement by 19 March.
Unfortunately, we cannot organise this for you. The business owner must deal with the application by creating your own Government Gateway account if you do not already have one. It is critical also that you know exactly how much you owe so that you can progress matters with HMRC.
Vat rules for construction sector started
The new “reverse charge” system of VAT accounting affects sub-contractors supplying their services to main contractors in the construction sector. Under the new rules, supplies of standard or reduced-rated building services between VAT-registered businesses in the supply chain are no longer invoiced in the normal way. Under the new reverse charge system, the sub-contractor does not show VAT on their invoice to the main contractor and does not account for output VAT on that transaction.
The new reverse charge applies to activities covered by the construction industry scheme (CIS) payment rules also.
Please contact us if you need help understanding this new system.