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Making Tax Digital applies to all VAT registered businesses from April 2022. Are you ready? By Michael Ball, Streets Chartered Accountants
What are the requirements?
As already referenced, under MTD a business must keep digital records, but what does that mean? As the name suggests your business records need to be kept in a digital format, so manual records will no longer be allowed and the records must include the following details:- your business name, address, and VAT registration number
- any VAT accounting schemes you use
- the VAT on goods and services you supply
- the VAT on goods and services you receive
- any adjustments you make to a return
- the ‘time of supply’ and ‘value of supply’ for everything you buy and sell
- the rate of VAT charged on goods and services you supply
- reverse charge transactions – where you record the VAT on both the sale price and the purchase price of goods and services you buy
- your total daily gross takings if you use a retail scheme
- items you can reclaim VAT on if you use the Flat Rate Scheme
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Retail sales slow as confidence wanes, says experts
The retail sector has been through a great deal of late and the pandemic has meant much of retail bounced between being open and closed, significantly impacting sales and changing consumer behaviours.
In March 2020, non-essential retail stores began to close, pushing many consumers to buy goods online. In this context, while all comparisons are provided on a year-on-year (YoY) basis, those focused on online/in-store have also been compared with March 2019 (Yo3Y). This will be clearly signposted below.
Sales figures are not adjusted for inflation. Given that both the March SPI (BRC) and February CPI (ONS) show inflation running at historically high levels, a portion of the sales growth will be a reflection of rising prices rather than increased volumes.
Covering the five weeks 27 February – 2 April 2022
- On a Total basis, sales increased by 3.1% in March, against an increase of 13.9% in March 2021. This is worse than the 3-month average growth of 6.9% and the 12-month average growth of 10.3%.
- On a three-year basis, Total retail sales grew 5.4% (Yo3Y) during March compared with the same month in 2019.
- UK retail sales decreased 0.4% on a Like-for-like basis from March 2021, when they had increased 20.3%. This was worse than the 3-month average growth of 3.2% and the 12-month average growth of 6.5%.
- Over the three months to March, Food sales decreased 2.6% on a Total basis and decreased 3.1% on a Like-for-like basis. This is below than the 12-month Total average growth of 0.8%. For the single month of March, Food was in decline year-on-year.
- Over the three-months to March, Non-Food retail sales increased by 14.9% on a Total basis and by 8.6% on a Like-for-like basis. This is worse than the 12-month Total average growth of 18.3%. For the single month of March, Non-Food was in growth year-on-year.
- Over the three months to March, In-Store sales of Non-Food items grew 92.9% on a Total basis and 74.9% on a Like-for-like basis. This was an improvement on the Total 12-month average growth of 69.9%.
- On a three-year comparison, over the three months to March, In-Store sales of Non-Food items declined 18.2% (Yo3Y) on a Total basis and 3.9% (Yo3Y) on a Like-for-like basis since March 2019.
- Online Non-Food sales decreased by 29.0% during March, compared with growth of 64.7% in March 2021. This is worse than the 3-month decline of 27.3%.
- On a three-year comparison, Online Non-Food sales increased by 38.9% (Yo3Y) in March. This is broadly in line with the 3-mth average increase of 38.8%.
- Non-Food Online penetration rate decreased to 38.5% in March from 63.0% in March 2021. However, it was up 9.2 percentage points on the 29.3% seen at the same point in 2019.
Helen Dickinson OBE, Chief Executive | British Retail Consortium says:“As consumer confidence continued to sink, March saw sales slow, and while spend remained above last year this likely reflects higher prices. Beauty and fashion items were popular last month, as consumers took to their town and city centres for some retail therapy in the run up to Mother’s Day. While it is promising to see experiential shopping back in fashion, much in-store retail has not recovered to its pre-pandemic level. Online sales also decreased compared to last year but remain well above 2019 levels due to investment by retailers in their digital offer.
“The rising cost-of-living and the ongoing war in Ukraine has shaken consumer confidence, with expectations of people’s personal finances over the next 12 months reaching depths not seen since the 2008 financial crisis. Furthermore, households are yet to feel the full impact of the recent rise in energy prices and national insurance changes. There is also potential for further supply chain disruption, with China putting key manufacturing and port cities into lockdown. Ultimately, consumers face an enormous challenge this year, and this is likely to be reflected in retail spend in the future.”
Don Williams, Retail Partner, KPMG adds:“Growth on the high street continued last month with total sales up 3.1% compared to March 2021, driven by a strong performance across most non-food categories. However, the drag came from food sales which were down 6.1%, potentially due to the timing of Easter in 2021 and compounded by the impact of the lockdown in March last year.
“Online sales fell across all categories compared to March 2021, but penetration rates remain high confirming the “locked in step up” in online purchasing. This continues to force retailers to focus on finding the most effective mix between physical and online retailing.
“Sales growth in March rose at the slowest rate so far this year, suggesting clouds on the horizon as household budgets come under pressure from rising costs, an increasing tax burden and competition from holidays. There is concern on what this could mean for consumer confidence and the impact on discretionary spend. Additionally, retailers are facing their own battle with rising costs and inflation, and are walking a tightrope between absorbing rising costs themselves or passing these on to consumers, when competition for share of a shrinking wallet is increasingly fierce. The best retailers will continue to balance attention on areas that can yield cost and efficiency gains with a clear understanding of their customer and what they want to buy and how. The primary concern now is whether consumers will choose to reduce their physical and virtual shopping to counteract rising household bills and reduced household income.”
Food & Drink sector performance | Susan Barratt, CEO | IGD
“Food and drink sales struggled in March, partly due to facing strong comparatives to 2021. Not only were sales elevated last year due to lockdown, but Easter was also earlier and we’re yet to see holiday spending ramp up this year.
“It is no surprise that shopper confidence continues to fall and is now lower than the previous low of December 2013 when the horsemeat scandal impacted the food industry. There was a brief peak in confidence when it looked like oil prices might come down, but with 50% of shoppers now expecting food prices to become much more expensive, this optimism was short-lived. These challenges affect shoppers in different ways, with household cutbacks seeing less affluent shoppers skipping meals to save money. This volatile time is set to continue as the reality of the energy price increase, as well as general inflation, hits home for shoppers.”
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Energy strategy to create half a million jobs and wean us off fossil fuels, labelled as ‘recipe for failure’
- Offshore wind: A new ambition of up to 50GW by 2030 – more than enough to power every home in the UK – of which we would like to see up to 5GW from floating offshore wind in deeper seas. This will be underpinned by new planning reforms to cut the approval times for new offshore wind farms from four years to one, and an overall streamlining which will radically reduce the time it takes for new projects to reach construction stages while improving the environment.
- Oil and gas: A licensing round for new North Sea oil and gas projects planned to launch in Autumn, with a new taskforce providing bespoke support to new developments – recognising the importance of these fuels to the transition and to our energy security, and that producing gas in the UK has a lower carbon footprint than imported from abroad.
- Onshore wind: developing partnerships with a limited number of supportive communities who wish to host new onshore wind infrastructure in return for guaranteed lower energy bills.
- Heat pump manufacturing: A Heat Pump Investment Accelerator Competition in 2022 worth up to £30 million to make British heat pumps, which reduce demand for gas.
“Scaling up cheap renewables and new nuclear, while maximising North Sea production, is the best and only way to ensure our energy independence over the coming years.”
Dr Shaun Fitzgerald FREng, Director of the Centre for Climate Repair says ” “The Energy Strategy launched by the government today is just 3 days after the harrowing IPCC AR6 WGIII report as to what is happening climate-wise and the urgency required for measures to change course. On Monday we learned that emissions need to peak no later than 2025. That is three years from now. “We need to see change, and we need to see it fast. Does the Energy Strategy launched today deliver these changes in the timescales required? “A big story in the strategy involves the procurement of new nuclear stations. Whilst these will be low carbon in operation, they won’t be delivering electricity in the timescale required. It is at least 10 years hence for a new power station. “Furthermore, an Energy Strategy should involve significant efforts in both supply and demand. The Energy Strategy today talks a lot about Energy Supply, but much less on Demand Reduction. Reducing demand (by increasing efficiency) has an immediate benefit not just in terms of the climate, based on the assumption that some of the energy is still provided by fossil fuels, but also in terms of bills. And energy bills are a huge issue for many people right now. The Energy Strategy launched today is really an Energy Supply Strategy. We need more investment, urgently, in energy savings schemes. This would also help reduce our reliance on energy imports. “The pace of change associated with today’s Energy Strategy is nothing like that which we need. And the climate won’t wait.” Prof Sir Jim McDonald FREng FRSE, President of the Royal Academy of Engineering, says: “The UK’s energy system faces a combination of threats from high consumer costs that threaten to worsen energy poverty, disruptions in the global supply chain due to Russia’s invasion of Ukraine, increasing risk to energy security and unsustainably high carbon emissions as a result of fossil fuel dependence, which must fall rapidly and immediately in order to have any chance of meeting the Paris goal of 1.5C. “There are many vital, low-regrets policies that would address all these issues at the same time, particularly:- rapid renewables and energy storage deployment alongside energy network investment;
- home insulation measures which deliver at least half a million retrofits per year, including support for heat pump supply chains; and,
- measures to reduce energy demand and increase energy efficiency across all sectors.