Changes you need to know about to VAT
On 1st April two major changes to VAT were implemented. One or both of these may affect your business, so read on to find out more.
Making Tax Digital is now mandatory for all VAT-registered businesses
Making Tax Digital (MTD) became mandatory for all VAT registered businesses on the 1 April 2022. The government states that MTD helps taxpayers get their tax returns right by reducing common mistakes as well as saving time managing their tax affairs and is a key part of the overall digitalisation of UK tax.
VAT-registered businesses that have not yet signed up to MTD for VAT should do so now. All VAT-registered businesses must use MTD for VAT for their first VAT return period that starts on or after 1 April 2022. For any business concerned about this, we can help to choose the software that is right for you, whether that is one of the simple free options available, or a more advanced product for those with more complex affairs. Please contact your accountant for advice.
VAT rate has returned to 20%
Despite the hopes of the hospitality sector, the Chancellor has not extended the 12.5% reduced rate that has applied since 1 October 2021 but, as scheduled, the rate has reverted to 20% from 1 April 2022. This will apply to hospitality, visitor attractions, and catering services including restaurants and takeaways. This has a consequential effect on the VAT Flat Rate Scheme percentages from 1 April 2022 as set out below:
| Type of Business | Before 15 July 2020
and from 1 April 2022 |
15 July 2020 to 30 September 2021 | 1 October 2021 to 31 March 2022 |
| Catering services including restaurants and takeaways | 12.5% | 4.5% | 8.5% |
| Hotel or accommodation | 10.5% | 0% | 5.5% |
| Pubs | 6.5% | 1% | 4% |
Affected businesses should ensure that their pricing policies and internal systems and processes are updated for the 1 April 2022 change in VAT rate. Please talk to us if you need any assistance or advice.