Are you ready for 2023? Changes in VAT and other indirect taxes for 2023

The 2023 changes continue to be driven by the UK adapting its systems, processes and tax regimes to the new environment created by the UK’s exit from the EU.

While some of these changes will impact organisations across the board, others are limited to importers of goods.

We have outlined an overview of the forthcoming changes and the key dates you should be aware of below relating to:
 

Throughout 2023

EU’s VAT in the Digital Age (ViDA) package

The European Commission has launched its long-awaited proposals to modernise the VAT rules within the EU collectively known as ViDA. These could have a significant impact on UK businesses trading across the EU from 2025 onwards. 

The ViDA proposals consist of three key parts, commonly referred to as:

• The Platform economy
• The Single VAT registration
• Digital reporting and E-invoicing.

The ViDA proposals will now be discussed by the EU Member States and ultimately, they will require unanimous approval by all Member States to come into law. It is, therefore, expected that there will be a number of developments regarding ViDA during 2023 – bookmark this page to keep up to date with developments.

1 January 2023

Default surcharge changes

For VAT periods beginning after 1 January 2023, the long-standing default surcharge regime applicable to the late submission of returns and/or the late payment of associated VAT will be replaced by a new penalty regime. This will operate a points-based system where points are issued for late filing and upon reaching a threshold a fixed penalty of £200 will be levied. Penalties in respect of late payments will be calculated when payments are outstanding over 15 days and then a daily rate will be applied to any balances outstanding beyond 30 days. HMRC has indicated it will not charge the 15 – 30-day penalty for late payments throughout 2023 (unless any payment is more than 30 days late), to enable taxpayers to get used to the changes.

Read more here
 

1 February 2023

Changes to option to tax processes

HMRC have confirmed that they intend to implement the following changes to the VAT option to tax process with effect from 1 February 2023:

1. HMRC will stop issuing option to tax notification letters in response to taxpayer submissions
2. HMRC will stop processing requests to confirm the existence of an option to tax apart from in limited circumstances (e.g. the effective date of the option is likely to be more than 6 years ago)

Such changes increase the onus on taxpayers to ensure they maintain accurate information regarding their option to tax position.
 

13 February 2023

EU Excise Duty changes

A significant change in the process for moving excise duty paid goods between EU Member States will take effect from 13 February 2023. EU Member States (and Northern Ireland) are changing from a paper-based system to using the ‘Excise Movement and Control System’ “EMCS” to track the movement of duty paid goods. Previously, this system was only used for tracking movements of duty suspended goods.

Currently, duty paid goods can move throughout the EU with a paper ‘Simplified Accompanying Administrative Document’ “SAAD”. However, from 13 February onwards, an ‘electronic Simplified Administrative Document’ “e-SAD” must be raised on EMCS and a movement guarantee (a financial guarantee to cover the excise duty due on the goods) provided after entering details of the goods being transported.

A number of changes to existing excise schemes are being implemented to accommodate the changes:

• The Registered Commercial Importer and Unregistered Commercial Importer schemes will be replaced by the Certified Consignee and Temporary Certified Consignor trader types.
• The new Certified Consignor and Temporary Consignor trader types are being introduced for traders despatching and receiving excise duty paid goods.

Traders will need to be authorised by their local Customs authority to gain the above approvals and access to EMCS. From 13 February 2023, all movements of duty paid goods between Northern Ireland and the EU must be between a Certified Consignor and Certified Consignee.
 

15 March 2023

Date of Spring Budget

The Chancellor of the Exchequer will provide an update on Government finances and proposals for changes to taxation which may contains updates in respect of VAT and other indirect taxes. While new duty rates usually come in on the 1 February each year, the Government has indicated that this year decisions on duty rates will be deferred until the Spring Budget on the 15 March 2023.
 

1 May 2023

Introduction of VAT-related payment scheme for the sale used cars to Northern Ireland and the EU

Following lengthy review of the second-hand margin scheme for motor vehicles purchased in Great Britain (GB) and sold to Northern Ireland (NI) and the European Union (EU), HMRC have recently released its updated guidance for businesses in the industry.

From the 1 May 2023, HMRC will introduce the new second-hand motor vehicle payment scheme which will be available where a UK VAT registered business moves a second-hand vehicle purchased in GB to NI for resale in NI or to the EU. Whilst the margin scheme will no longer be available for used vehicles sold to Northern Ireland, the new scheme should put businesses in a similar financial position as if they were able to access the second-hand margin scheme. The guidance released by HMRC is interesting as it outlines that an EU business may be able to claim a (UK) VAT related payment where it purchases a second-hand vehicle from GB and exports this to the EU to be sold in the EU or to NI.

The design of the scheme would also appear to present a fraud risk, for example vehicles only need to be held out for sale to claim the payment. We are discussing the practicalities with HMRC’s automotive policy team.
 

1 August 2023

Alcohol duty reforms

The duty structure for alcoholic products is to be amended to a standardised series of tax bands based on alcohol by volume. Any business involved in manufacturing, distributing, holding or sale of alcoholic products is likely to be affected and should take steps to ensure the impact of changes is understood and any necessary changes are made.

There will also be two new reliefs and a temporary easement as follows:

• Small Producer Relief replaces and extends the current relief for small brewers to all producers of all alcoholic products.
• Draught Relief will reduce the tax rate on draught containers holding at least 20 litres of qualifying alcoholic products.
• The temporary easement will be to assist wine producers and importers in managing the transition to the new method of calculating duty. It is intended to be in place for 18 months.
   

30 November 2023

End of Customs Handling of Import and Export Freight (“CHIEF”) - Customs Declaration Service (“CDS”) to become sole customs platform

The use of HMRC’s long-standing customs platform, CHIEF, came to an end for import declarations on 30 September 2022 and was replaced by CDS. The use of CHIEF for export declarations will end on 30 November 2023 (having been pushed back from 31 March 2023) and exporters still using CHIEF should take steps ahead of this date to ensure that they are ready and able to make declarations via CDS instead, given the potential disruption to their supply chains.
 

31 December 2023

Safety and Security Declarations

Having left the EU, the UK has delayed the requirement to complete Safety and Security Declarations (“SSD”) in respect of goods imported from the EU. However, this is expected to end on 31 December 2023 and, whilst submitting the SSD is normally the responsibility of the carrier, businesses will need to be preparing in advance of this to ensure that they have the capacity, resources, and knowledge to provide the information required to the carrier.

Trader Support Scheme (“TSS”) potentially ends

The TSS was set up to assist taxpayers with understanding the rules applicable to the movement of goods between Great Britain (GB) and Northern Ireland (NI) and to provide a portal for customs declarations to be made for the movement of goods between GB and NI. It provides support, guidance and training, including assistance with the completion of import and safety and security declarations. The TSS has been extended to the end of 2023; however, businesses should make plans for the system to end on this date.

End of retained EU law

Under the current wording of the Retained EU Law (Revocation and Reform) Bill, most remaining EU derived law in the UK (a major example of which would be the VAT legislation) will be repealed unless a specific decision is taken by ministers to retain an individual piece of legislation going forward. There is therefore potential scope for changes to occur to the laws governing UK VAT, which have so far been left largely untouched since Brexit.

Shared from BDO