Other VAT measures announced by HMRC
- Zero-rating e-publications
- Temporary VAT zero-rating of personal protective equipment (PPE)
- Government to give VAT from donated PPE to healthcare charities
- Correcting VAT return errors
- Making Tax Digital (MTD)
- Sending forms and other documents to HMRC
- Securities in respect of VAT at risk
- Instrastat submissions
- Reasonable excuse and more time to appeal
- Barristers and advocates
- Domestic reverse charge VAT for construction services ― delay in implementation to 1 March 2021
- Change of use of certificated buildings
- Temporary reduced rate for certain supplies in the hospitality industry
HMRC has announced that it is bringing forward the implementation date for zero-rating e-publications to 1 May 2020. This decision has been reached due to the coronavirus (COVID-19) outbreak in order to reduce the cost of access to online publications during this challenging period.
Temporary VAT zero-rating of personal protective equipment (PPE)
HMRC has announced in R&CB 4/20 that there is a change to UK law to introduce a temporary zero-rate for the supply of PPE recommended for the use for protection against infection with coronavirus. A summary is provided below:
The temporary zero-rating provisions will apply to all supplies of PPE that are made between 1 May and 31 October 2020, and that are recommended for use by Public Health England in its guidance dated 24 April 2020, entitled ‘COVID-19 personal protective equipment (PPE)’. This includes supplies made from existing stock.
The temporary zero-rating covers the following equipment:
- disposable gloves
- disposable plastic aprons
- disposable fluid-resistant coveralls or gowns
- surgical masks – including fluid-resistant type IIR surgical masks
- filtering face piece respirators
- eye and face protection ― including single or reusable full-face visors or goggles
But will not affect the VAT treatment of any of the supplies:
- described in Item 2 of Group 15 (Charities and such like) to Schedule 8, which allows for a zero-rate for goods donated by a charity or from charitable funds
- that would be exempt by virtue of Items 4 and 9 of Group 7 (Health and Welfare) to Schedule 9
More information is also contained in HMRC Notice 701/57.
Government to give VAT from donated PPE to healthcare charities
VAT is normally due on goods donated by businesses where they paid and reclaimed VAT when they originally purchased the goods and the usual gift rules continue to apply to goods donated in respect of the coronavirus pandemic . However, the Treasury has announced that VAT collected on donated PPE will be given to charities supporting the NHS and care workers. The amount to be donated to charity will reflect the VAT collected on donations made from 1 March until 30 April ― the period between PPE donations starting and when the zero VAT rate became effective (see above).
Businesses will have until the end of June to tell HMRC what VAT they have paid, giving them time to complete their usual accounts and identify these costs. Affected businesses should contact email@example.com for further information.
The Care Workers’ Charity and NHS Charities Together will benefit from the Government donation, and HMRC estimates that the donation will be between £500,000 and £1 million.
Correcting VAT return errors
HMRC has indicated that for the time being it is no longer possible to submit form VAT 652 (which is used to tell HMRC about VAT return errors) by post. However, the form can be submitted by email: firstname.lastname@example.org. For confirmation on HMRC’s position, see HMRC guidance VAT: correct errors on your VAT Return and for error correction generally see the Correcting errors guidance note.
Making Tax Digital (MTD)
HMRC has announced that it recognises that the impact of coronavirus is proving very difficult for all businesses to manage, and as a result it is committed to helping all those businesses facing unprecedented challenges. Therefore, it is providing all MTD businesses with more time to put in place digital links between all parts of their functional compatible software. This means that all businesses now have until their first VAT return period starting on or after 1 April 2021 to put digital links in place.
Sending forms and other documents to HMRC
HMRC has issued further updated guidance regarding how to send in forms to HMRC in Notice 700/44, which states that its post room has temporarily been closed in order to stop the spread of coronavirus. We understand that correspondence from barristers and solicitors went to a specific post room and it is that facility that is currently closed. This does not affect other businesses who can still currently post items where it is not possible to use the online service.
The advice now states the following:
‘HMRC is putting measures in place to reduce the spread of coronavirus while continuing to support our customers. This means we will not be able to process paper forms, returns or correspondence. We’re currently working on a solution that will let us continue to process these, and the page will be updated when we have more information about this. This guidance will be updated when this change ends.’
As a result, barristers and solicitors should no longer send documents to the email address that HMRC recently provided, and should await further instructions.
Option to tax ― HMRC has updated its guidance to state that businesses should only write to it about an option to tax if they cannot send the correspondence electronically. Any notification of an option to tax should be made using form VAT1614A and sent to HMRC via email to email@example.com
HMRC has also announced that it has made temporary changes to the time limit for opting to tax which has been increased from 30 days to 90 days. The changes apply to decisions made between 15 February and 31 October 2020.
Notice SIVA1: Simplified Import VAT Accounting has been updated to state that applications should be made via email with a supporting copy sent by post, until further notice.
Securities in respect of VAT at risk
HMRC has published updated guidance that has removed reference to the ability for businesses to pay their security via a cheque. HMRC is currently unable to accept and process cheques as the postroom in Southend has been closed due to the coronavirus outbreak. Businesses will need to use one of the other methods detailed in the guidance to provide any security requested by HMRC.
HMRC has made the following announcement:
‘As you are aware, your Intrastat declarations are due to be submitted by the 21st of the month. Intrastat declarations are important to HM Government, the data is a key indicator on the state of the UK economy. It is critical at this time to monitor and assess the flow of goods for the UK. However, HMRC understands that current exceptional circumstances may be affecting your businesses and your ability to complete the Intrastat declaration. If you cannot submit your Intrastat declaration in the normal way, please email our HMRC Intrastat advisors on firstname.lastname@example.org as soon as possible.’
Businesses who are aware that they may not be able to submit their Intrastat return by the due date should notify HMRC using the email address as soon as possible.
Reasonable excuse and more time to appeal
According to the ATT, HMRC has now confirmed that, where a taxpayer is unable to meet an obligation (such as a payment or filing deadline) due to coronavirus, that will be accepted as a reasonable excuse, provided the taxpayer manages to remedy the failure as soon as possible. Taxpayers should explain how they were affected by coronavirus when making their appeal, as well as making the return or payment as soon as possible.
Taxpayers affected by coronavirus will also be given additional time to seek a review of, or to appeal against, a decision reached by HMRC.
HMRC will grant an extra three months to appeal against any decision that is dated from the 20 February onwards. Appeals should be submitted as soon as possible explaining that the delay was as the result of coronavirus.
HMRC has also stated that it will not object if an application is made to the tribunal to hear a late appeal, due to coronavirus, provided that the:
- review of the decision is dated February 2020 or later; and
- the application is made within three months of the normal deadline
The following guidance on HMRC has been updated to reflect the above:
- Disagree with a tax decision – reasonable excuses
- Disagree with a tax decision – appeal against a tax decision
- Disagree with a tax decision – appeal against a penalty
Barristers and advocates
HMRC has updated Notice 700/44 to state the following:
‘Temporary changes have been put in place to stop the spread of coronavirus. We are reducing paper contact and asking you to pay electronically. If you normally send a cheque payment, please pay online using one of the alternative payment options available.
If you need a return, please contact the Government Accounting and Barristers Team by phone on 03000 556500 and we will issue one by email. You should complete it and return it to:
HM Revenue & Customs
Government Accounting and Barristers
For any queries, please contact the Government Accounting and Barristers Team by phone on 03000 556500.’
Domestic reverse charge VAT for construction services ― delay in implementation to 1 March 2021
HMRC has announced in Revenue and Customs Brief 7/20 that it will be delaying the introduction of the domestic reverse charge for construction services to 1 March 2021, due to the impact of coronavirus.
HMRC has also stated that there will be an amendment to the original legislation, which was laid in April 2019, to make it a requirement that for businesses to be excluded from the reverse charge because they are end users or intermediary suppliers, they must inform their subcontractors in writing that they are end users or intermediary suppliers.
Change of use of certificated buildings
HMRC has added the following guidance to Notice 708 relating to a taxable charge that arises if a person changes the use of a certificated building within 10 years:
‘If you are subject to a self-supply charge under the change of use provisions, as a direct result of loaning your building due to coronavirus, you should contact HMRC through your customer compliance manager or the charities compliance team by email: email@example.com.’
Temporary reduced rate for certain supplies in the hospitality industry
The Government announced on 8 July 2020 that certain supplies of services within the hospitality industry would be reduced to 5% from 15 July 2020 to 12 January 2021.
The following supplies are covered by the scope of the temporary reduced rate:
- catering ― on-site consumption ― sales of food and drink will be subject to the reduced VAT rate, apart from alcoholic drinks, which remain subject to 20% VAT. See HMRC notice 709/1 for more information
- catering ― hot takeaway sales ― hot food and / or hot drinks sales that are non-alcoholic are liable to 5% VAT. All other supplies are liable to VAT at the standard rate unless they already qualified for the zero-rate as food
- admission to attractions which includes shows, theatres, circuses, fairs, amusement parks, concerts, museums, zoos, cinemas, exhibitions, similar cultural events and facilities. Any supplies that were already exempt under the VAT cultural exemption will remain exempt from VAT, and the exemption takes priority. It is only the admission that is liable to the reduced rate, unless any other goods supplied together with the admission can be treated as incidental to the supply of admission. The reduced rate does not apply to admission to sporting events
- supplies of hotel accommodation etc ― the reduced rate will apply to the provision of sleeping accommodation in hotels, inns, boarding houses and similar. If a hotel provides food and drink together with the accommodation, these supplies will also liable to the reduced rate as catering (see above). See HMRC notice 709/3 for more information
- supplies of holiday accommodation ― the grant of a licence to occupy holiday accommodation and charges of pitches for campsites and caravans and any associated facilities is also liable to the temporary reduced rate
HMRC has stated that the flat rate scheme percentages will be revised to reflect the fact that certain supplies are liable to the temporary reduced rate. Details of the revised percentages have been included in The Value Added Tax (Reduced Rate) (Hospitality and Tourism) (Coronavirus) Order 2020 (SI 2020/728), article 6, which states that the following percentages are applicable:
- catering services including restaurants and takeaways reduced to 4.5%
- hotel or accommodation reduced to 0%
- pubs reduced to 1%
Revised Tour Operator’s Margin Scheme calculations have also been provided by HMRC so businesses can calculate the amount of VAT due under the scheme as some supplies made by tour operators will temporarily be liable to VAT at the reduced rate. The margin remains liable to VAT at the standard rate. See HMRC Notice 709/5 for more information.
Change in VAT rate. The decision to implement this change in rate as soon as possible has resulted in the rate changing in the middle of the month, which is not ideal from an accounting perspective. Businesses will need to take steps to ensure that the correct amount of VAT is calculated on supplies made with a tax point before 15 July and for supplies made with a tax point on and after 15 July. See HMRC Notice 700, section 30 for more information regarding calculating VAT due when there is a change in VAT rate.
Businesses will also need to take steps to review accounting software, cash registers, invoicing software etc to ensure that these are reconfigured to calculate the correct amount of VAT due on these supplies from 15 July 2020 to 12 January 2021. Businesses also need to ensure that the accounting software and cash registers are also reconfigured at the end of this period to start to calculate VAT at the standard rate again.
HMRC has, however, stated that if a deposit for accommodation has been received before 15 July 2020 that relates to accommodation provided between 15 July 2020 and 12 January 2021, that 5% VAT can be accounted for on the deposit if preferable. See HMRC Notice 700, para 30.12.
See the Hospitality industry ― temporary reduced rate guidance note for more information.