New reporting requirement for FRS businesses
New reporting requirement for FRS businesses
HMRC’s latest Business Brief sets out the new rules which will apply for VAT return periods commencing on or after 1 June 2022.
The change is needed to correct HMRC’s previous guidance regarding FRS-registered businesses that used postponed accounting for imports rather than paying VAT at the point of entry to the UK. Previously HMRC's guidance was to include the value of imports in their FRS turnover, whereas the legislation says it should be excluded. As a result, many businesses have underpaid VAT, while some have overpaid. The good news is that HMRC is not asking businesses to repay any VAT that has been underpaid as a result of its earlier guidance but will allow those that overpaid to claim a refund.
All FRS-registered businesses using postponed accounting must from the beginning of June 2022 exclude the value of imported goods from their turnover liable to the FRS rate. Instead, they must work out the VAT payable at the normal rate applicable to the goods and include this amount in Box 1 of their returns.
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