UK Spring Budget 2021 – VAT, Customs, Excise Duties and Environmental Taxes
The key highlights of the Chancellor’s Spring Budget affecting VAT, Customs, Excise Duties and Environmental Taxes are set out below.
VAT
Tourism and Hospitality Sector - VAT on supplies of accommodation (such as hotels, B&Bs, campsites and caravan sites), admission to attractions (including cinemas, theme parks and zoos) and food and non-alcoholic drinks served by restaurants, cafes and pubs, will remain at 5% until 30 September 2021. This will be followed by a new reduced rate of 12.5% applying between 1 October 2021 and 31 March 2022, before reverting to the standard rate of 20%.
VAT Deferral Payment Scheme – Businesses that deferred VAT payments for returns due between 20 March to 30 June 2020 now have the option to pay them in 11 equal and interest free instalments, rather than making one larger payment due by 31 March 2021.
MTD for VAT Extension – Making Tax Digital for VAT is to be extended to all VAT registered businesses with effect from 1 April 2022.
Penalties for Late Submission of VAT Returns and Payment – From 1 April 2022, VAT registered businesses will be subject to a new, late submission and payment penalty regime aimed at taxpayers who persistently do not comply with submission and payment deadlines. The late submission regime will be points-based. When a deadline is missed, the taxpayer will incur a point. A fixed penalty of GBP200 will apply for every missed submission on and after a relevant points threshold is reached. The threshold will depend on the taxpayer’s submission frequency (Annually = 2 points. Quarterly = 4 points. Monthly = 5 points). After the points threshold has been reached, all points will expire after the returns have been on time for a set period based on submission frequency. The late payment regime will introduce a 2% penalty chargeable on the outstanding amount if paid between 16 and 30 days after the due date. A 4% penalty applies on the outstanding amount if unpaid after 30 days after the due date. A second penalty is charged at 4% per annum on the total unpaid tax from day 31.
Tax Administration, Electronic Sales Suppression – New electronic sales suppression-specific powers will make offences for the possession, manufacture, distribution and promotion of electronic sales suppression software and hardware. HMRC investigators will also be able to identify developers and suppliers in the electronic sales suppression supply chain and to access software developers’ source code.
Tax Avoidance, Disclosure of VAT and Other Indirect Taxes (DASVOIT) – There will be further changes to existing legislation to allow HMRC to act promptly where promoters fail to disclose their avoidance schemes under the DASVOIT regime.
VAT Registration Threshold – The current VAT registration threshold of GBP85,000 will remain until 31 March 2024.
Customs, Excise Duties and Environmental Taxes
Airlines - Air Passenger Duty for long haul travel will increase from 1 April 2022 as follows. Rates applicable from 1 April 2021 are in square brackets.
| Bands (distance in miles from London) | Reduced rate | Standard rate | Higher rate |
| Band A (0 – 2000 miles) | GBP13 [GBP13] | GBP26 [GBP26] | GBP78 [GBP78] |
| Band B (over 2000 miles) | GBP84 [GBP82] | GBP185 [GBP180] | GBP554 [GBP541] |
Alcohol Duty – There will be no increase to any alcohol duties for a second year running.
Alcohol and Tobacco Industry - Introduction of Review and Appeals Legislation – The government will legislate to enable HMRC to temporarily approve businesses which have had their approval revoked under specified due diligence schemes. Granting temporary approval in these circumstances will protect their right of appeal and ensure businesses remain viable during the appeal process.
Customs – Seizure of Goods in Situ - Seizure of goods which are kept at the trader’s premises are known as ‘in situ’. A civil penalty will be introduced in relation to the unauthorised removal of goods seized in situ.
Plastic Packaging Tax - From 1 April 2022, a new tax will apply to plastic packaging manufactured in, or imported into the UK, that does not contain at least 30% recycled plastic. Businesses which manufacture or import more than 10 tonnes of plastic packaging with less than 30% recycled plastic will be liable to register and pay the new tax at GBP200 per tonne.
Should you have any queries on the issues raised in this summary, please reach out to your usual UK tax contact or one of the contacts below.
