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Autumn Budget 2017 – VAT registration threshold frozen and online VAT fraud targeted

carolineheath 22 November 2017 No comments

Today Chancellor Philip Hammond presented his first Autumn Budget.  The main VAT-related measures announced were:

VAT registration thresholds

In response to the Office of Tax Simplification’s report Value Added Tax: Routes to Simplification, the government will consult on the design of the threshold. In the meantime the registration threshold will be maintained at the current level of £85,000 for two years from April 2018.  The deregistration threshold will remain at £83,000.

The registration and deregistration threshold for relevant acquisitions from other EU Member States will also remain at £85,000 whilst the UK is a member of the EU.

Online VAT Fraud

The Chancellor announced a raft of measures intended to increase the fight against online VAT fraud.  These include:

  • Extending powers to UK businesses – The government will legislate in Finance Bill 2017-18 to extend HMRC’s powers to hold online marketplaces Jointly and Severally Liable (JSL) for the unpaid VAT of overseas traders on their platforms to include all (including UK) traders. This extension will help tackle the UK hidden economy and eliminate the risk of overseas traders establishing a UK shell company simply to escape the existing JSL This will come into force on Royal Assent in the spring.
  • Extending powers on overseas businesses – The government will legislate in Finance Bill 2017-18 to extend HMRC’s powers to hold online marketplaces JSL for any VAT that a non-UK business selling goods on their platforms fails to account for, where the business was not registered for VAT in the UK and that online marketplace knew or should have known that the business should be registered for VAT in the UK. This will come into force on Royal Assent in the spring.
  • VAT number display – The government will legislate in Finance Bill 2017-18 to require online marketplaces to ensure that VAT numbers displayed for businesses operating on their website are valid. They will also be required to display a valid VAT number when they are provided with one by a business operating on their platform. This will come into force on Royal Assent in the spring.
  • Split payments – To reduce online VAT fraud and improve how VAT is collected, the government is looking at a split payment model. Following the call for evidence launched at Spring Budget 2017, the government will publish a response in December.

The government expects digital platforms to play a wider role in ensuring their users are compliant with the tax rules. It is to publish a call for evidence in spring 2018 to explore what more digital platforms can do to prevent non-compliance among their users.

A guidance note on these new measures has been published.

Access to VAT refunds

The government will make the following changes to VAT refunds:

  • Combined Authorities – Through Finance Bill 2017-18, legislation will be amended to ensure UK Combined Authorities and certain fire services in England and Wales will be eligible for VAT refunds
  • Scottish Fire and Rescue Service and Scottish Police Authority – Through Finance Bill 2017-18, legislation will be amended to ensure that Scottish Police and Fire Services will be eligible for VAT refunds
  • Accident Rescue Charities Grant Scheme – A grant will be provided to help accident rescue charities meet the cost of normally irrecoverable VAT.

VAT fraud in labour provision in the construction sector

Following a consultation into options for tackling fraud in construction labour supply chains, the government will introduce a VAT domestic reverse charge to prevent VAT losses. This will shift responsibility for paying VAT along the supply chain to remove the opportunity for it to be stolen.

The changes will have effect on and after 1 October 2019. The long lead-time is intended to give businesses adequate time to prepare for the change.

Import VAT

Businesses currently benefit from postponed accounting for VAT when importing goods from the EU which provides a significant cashflow benefit. The government has announced that it will take this into account when considering potential changes following EU exit and will look at options to mitigate any cash flow impacts.

VAT and vouchers

The government is to consult on plans to legislate in Finance Bill 2018-19 to ensure that when customers pay with vouchers, businesses account for the same amount of VAT as when other means of payment are used, aligning the UK with similar changes being made across the rest of the EU.

Northern Ireland VAT and tourism

Early in 2018, the government will publish a call for evidence which will consider the impact of VAT and Air Passenger Duty on tourism in Northern Ireland. It will report its findings at Budget 2018.

Late Submission Penalties and Late Payment Interest

The government is to reform the penalty system for late or missing tax returns, adopting a new points-based approach.
It will also consult on whether to simplify and harmonise penalties and interest due on late payments and repayments. This is intended to ensure that the system is fair, simple and effective across different taxes.
Final decisions on both measures will be taken following this latter consultation.

The full set of Autumn Budget documents can be viewed here.

Please contact us if you would like further information on any of these measures.