2021 Budget

This is the fourth in our series of seven blogs regarding the 2021 Budget delivered by the Chancellor, Rishi Sunak on 3 March 2021 and covers VAT and Duties.

VAT

VAT threshold

• The VAT registration threshold will remain as £85,000

• The VAT deregistration threshold will remain as £83,000

These thresholds will not change for two years from 1 April 2022.

Temporary VAT Rate for the Holiday Accommodation, Attractions and Hospitality Sectors

• The temporary 5% VAT rate for the holiday accommodation, attractions and hospitality sectors will be extended until 30 September 2021

• The temporary rate for these businesses will then be increased to 12.5% for a further six months to 31 March 2022 

• The VAT rate for these businesses will then revert to 20% from 1 April 2022 

Reform of penalties for the late submission of VAT returns and interest for the late payment of VAT

• The UK Government plans to reform the penalty regime for VAT to “make it fairer and more consistent”

• The new late submission regime will be points-based, and a financial penalty of £200 for each missed submission will only be issued when the relevant threshold is reached

• The new late payment regime will introduce penalties proportionate to the amount of tax owed and how late the tax due is

There will be no penalty at all if the VAT is paid within 15 days of the due date.

The first penalty will be 2% of the outstanding amount if the VAT is paid between 16 days and 30 days after the due date plus 4% of the outstanding amount if there is VAT unpaid 30 days after the due date.

A second late payment penalty will be charged at a rate of 4% per annum, calculated on a daily basis on the total unpaid VAT incurred from day 31

This could lead to higher penalties for businesses that are persistently non-compliant but should reduce costs for businesses having short term payment difficulties.

To avoid a penalty or penalties, the taxpayer will need to either pay or approach HMRC to agree a Time to Pay Arrangement.

• A new approach to interest charges and repayment interest will align VAT with other tax regimes

• These reforms will come into effect from periods starting on or after 1 April 2022

Duties

Fuel and Alcohol  Duty

• Fuel and alcohol duties remain frozen for another year

• Future fuel duty rates will be considered in the context of the UK’s commitment to reach net-zero emissions by 2050

 Vehicle Excise Duty (VED)

VED rates for cars, vans and motorcycles will updated in line with the Retail Price Index (RPI) from 1 April 2021.

VED and Levy rates for heavy goods vehicles (HGVs)

To support the haulage sector and pandemic recovery efforts, the UK Government will freeze HGV VED for 2021-22 and will suspend the HGV Levy for another 12 months from August 2021.

 Red diesel

In the 2020 Budget, the UK Government announced that it would remove the entitlement to red diesel and rebated biofuels from April 2022 except for agriculture (including horticulture, fish farming and forestry), rail vehicles and for non-commercial heating use.

Further exceptions were confirmed in the 2021 Budget for those using red diesel to power vessels for commercial purposes, including fishing and water freight, travelling funfairs and circuses, amateur sports clubs as well as golf courses and non-commercial power generation.

Links to other 6 Budget Blogs

https://jsca.co.uk/budget-2021/

Income Tax and National Insurance

https://jsca.co.uk/budget-2021-2/

Capital Gains, Inheritance Tax, Pensions, ISAs, 95% Mortgage Guarantee and Wealth Tax

https://jsca.co.uk/budget-2021-3/

Corporation Tax, Super-deduction and Special Rate Allowance, Extended Loss Carry Back for Businesses, New Recovery Loan Scheme, Preventing abuse of Research and Development (R&D) and Reform of Self-Assessment Penalties and Interest

https://jsca.co.uk/budget-2021-5/

SDLT and LBTT, Licensing in Scotland, Freeports, Levelling Up Fund Prospectus Launch, Green Initiatives, Investment in HMRC and Funding for Scotland

https://jsca.co.uk/budget-2021-6/

Self Employed Income Support Scheme (SEISS)

https://jsca.co.uk/budget-2021-7/

Coronavirus Job Retention Scheme (CJRS)

The information in this blog provides only an overview of HMRC guidance and legislation in force at the date of publication and no action should be taken without consulting the detailed HMRC guidance and legislation or seeking professional advice.  Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this blog can be accepted by the firm.

Photo by Lukas Blazek on Unsplash