The government will introduce legislation to apply a zero rate of VAT to e-publications from 1 December 2020, to make it clear that e-books, e-newspapers, e-magazines and academic e-journals are entitled to the same VAT treatment as their physical counterparts.
This is an interesting development. Whether e-publications can be included in the current zero-rating has been successfully litigated recently although HMRC were planning to appeal the decision as their view was that the zero-rating can only apply to the physical product. This is not a new zero-rate, but an amendment to the definition of the items covered by the existing zero-rating so it will be interesting how this impacts the litigation.
From 1 January 2021 the government will apply a zero rate of VAT to women's sanitary products.
There has been a call to remove VAT on sanitary products for many years, but the UK’s hands have been tied as it was restricted under EU law. Once the transition period is over the UK has the freedom to determine how the zero-rate is applied and this is an encouraging start.
From 1 January 2021 postponed accounting for VAT will apply to all imports of goods, including those from the EU.
This was first considered as part of the ‘no-deal’ Brexit guidance to manage cashflow. Under current rules, import VAT is due at the time of importation and traders have to wait for a physical import VAT certificate (C79) before they are able to reclaim the VAT. Under the new arrangements, trader’s will pay import VAT on their VAT return and also reclaim the VAT (subject to the normal rules) on the same VAT return. This reduces the cashflow burden.
Draft legislation has been issued to amend insolvency legislation from 1 December 2020. Broadly, HMRC will move up the creditor hierarchy for the distribution of assets in the event of an insolvency. HMRC will become a secondary preferential creditor in respect of certain tax debts held by a business which represent amounts paid by customers or employees. The taxes include VAT, PAYE, employee NICs and Construction Industry Scheme deductions.
The rules will remain unchanged for taxes owed by businesses themselves, such as Corporation Tax and employer NICs.
Draft legislation has also been issued to make directors, and other persons connected to companies subject to an insolvency procedure, jointly and severally liable for amounts payable to HMRC by the company in certain circumstances. This is mainly for cases where the company has engaged in avoidance, evasion or 'phoenixism'. This measure applies to all tax periods ending, and to facilitation penalties determined and issued, after the date of Royal Assent of the next Finance Act.
The rationale for HMRC to become a preferential creditor for certain taxes is that the taxes represent payments by customers (such as VAT) or deductions from employees (such as PAYE) and these amounts should 'go to fund public services rather than being distributed to other creditors'.
Plastic Packaging Tax
This will be a new tax that applies to plastic packaging produced in or imported into the UK that does not contain at least 30% recycled plastic. The tax rate will be £200 per tonne of non-compliant plastic packaging. A consultation on the design and implementation of the tax has been issued and the tax is to take effect from April 2022.