Changes To Taxation

6th April 2022

Just a few of the changes are listed on this page. Employers need to make sure they are up to date with HMRC regulations for all the changes coming in today 6 April 2022.

National Insurance goes up by 1.25% from today but there is some light at the end of the tunnel in July when the limits change benefiting lower paid workers.

VAT
End of the New Payments Scheme for COVID VAT deferral
The New Payments Scheme for Covid VAT deferral allowed taxpayers to pay deferred VAT payments from 2020 in interest free instalments. This scheme has now closed for all businesses so any unpaid amounts potentially subject to interest and/or penalties.

End of temporary reduced rate for leisure and hospitality.
In its Summer Economic Statement in July 2020, the government announced a number of VAT measures including a temporary reduction of the VAT rate for the hospitality, hotel and holiday accommodation sectors as well as admission to certain attractions from 20% to 5%. This VAT cut was designed to boost customer demand in response to the economic crisis caused by the Covid-19 pandemic. In the spring 2021 Budget, the Chancellor announced a second extension to the relief: the 5% rate of VAT was extended until 30 September 2021. From 1 October 2021 the hospitality sector VAT rate increased to 12.5% until 31 March 2022, after which time it is due to return to the standard rate, currently at 20%.

VAT default surcharge regime replaced by new regime for late payment of VAT and late filing of VAT returns.

The current default surcharge regime for penalising taxpayers who file their VAT returns late or who make late payments of VAT due to HMRC has long been recognised as being unfair and ineffective with many disputes around surcharges levied ending up in Tribunal. From 1 January 2023 a new regime is being introduced to make the penalty regime for late filing and payments fairer and consistent with other taxes. Additionally, there are changes relating to the interest payable and receivable by taxpayers in respect of VAT.

Making Tax Digital for VAT mandatory
Making Tax Digital for VAT will apply to business trading below the £85k VAT registration threshold (ie all remaining VAT registered businesses) for VAT return periods starting on or after 1 April 2022. As a result, such businesses will be required to maintain digital records of their VAT data, submit VAT returns to HMRC via appropriate software and ensure that all data is "digitally linked" throughout their VAT return process.

Use of rebated red diesel is much more restricted
From 1 April 2022 onwards, the use of 'rebated' red diesel (5% VAT) is restricted to a very small number of industry sectors (including agriculture, horticulture, fish farming, forestry and rail transport). HMRC says that businesses within sectors including construction, mining and quarrying, ports, manufacturing haulage (for transport refrigeration units on lorries), road maintenance, airport operations, oil and gas extraction, plant hire, logistics and waste management will no-longer be able to use red diesel. If your business uses red diesel, you will need to consider the impact of switching to higher cost fuel and whether existing contracts with customers/your supply chain will need to be adapted to reflect the change.

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