Shropshire businesses should seek professional advice when it comes to VAT or they could potentially face serious penalties.
That’s the message from Matt Orange, DY’s Indirect Tax Advisor, who warned businesses they should take action to avoid handling their VAT situation incorrectly.
“In April this year, VAT turned 50 years old, and despite being described as a simple tax when it was first introduced, it has proven itself to be anything but simple.”
Matt said in the last five decades there had been many VAT cases heard at tribunals, including one of the most famous being the debate whether Jaffa Cakes were biscuits or cakes for VAT purposes.
“More recently, there was George Osborne’s so-called pasty tax, which focused on whether VAT on pasties sold on the premises where they were baked should be charged at 20% or 0%.”
He said at the time it was introduced, the standard rate of VAT was only 8%, but it was currently 20% and had been at that high since 2011.
“Some goods and services though benefit from lower rates of 5% and 0%, and others are totally exempt or outside the scope of VAT.”
Matt said after the UK left the European Union, the Government now had the freedom to change the VAT laws as they deemed necessary.
“As an example of this, in the Spring 2022 Budget, the Government announced that the installation of energy saving materials would be zero-rated for VAT until March 2027. And while Brexit theoretically gives the Government the freedom to actually scrap VAT altogether, it’s not very likely since VAT was the third largest tax in the UK, raising £143 billion in 2021/22.”
Matt said like many taxes, VAT was self-assessed, so the responsibility lay with individual businesses to declare and pay the correct amounts to HM Revenue and Customs.
“If you fail to file your VAT accurately and on time, you could face serious penalties, and HMRC introduced a new penalty at the start of this year so businesses should make sure they familiarise themselves with the new rules.
Given the complexities and the potential for penalties if you handle your VAT incorrectly, it’s vital that businesses seek out professional advice and support to make sure you’re meeting all your VAT responsibilities.”
Matt Orange, DY’s Indirect Tax Advisor