Spring Budget 2017 – VAT Headlines
Gareth Bevan 27 October 2017 No comments
Today Chancellor Philip Hammond presented the last Spring Budget. Future Budgets will be delivered in the Autumn.
The main VAT-related measures announced in the Budget are:
VAT Registration and deregistration thresholds
From 1 April 2017 the VAT registration threshold will increase from £83,000 to £85,000 and the deregistration threshold from £81,000 to £83,000.
VAT Use and enjoyment provisions for business to consumer mobile phone services
The government will remove the VAT use and enjoyment provisions for business to consumer mobile phone services to individuals. This will resolve the inconsistency where UK VAT is applied to mobile phone use by UK residents when in the EU, but not when outside the EU. It will also ensure mobile phone companies cannot use the inconsistency to avoid UK VAT. This will bring UK VAT rules into line with the internationally agreed approach.
Secondary legislation to effect the change will be published before summer recess.
VAT Fraud in the provision of labour in the construction sector
The government will consult on options to combat missing trader VAT fraud in the provision of labour in the construction sector, in particular, applying the reverse charge mechanism so the recipient accounts for VAT.
A consultation document will be published on 20 March 2017.
VAT ‘Split Payment’ model
Some overseas traders avoid paying UK VAT, undercutting online and high street retailers and abusing the trust of UK consumers who purchase goods via online marketplaces. Building on the measures introduced in Budget 2016, the government will shortly publish a call for evidence on the case for a new VAT collection mechanism for online sales. This would harness technology to allow VAT to be extracted directly by the Exchequer from online transactions at the point of purchase. This is often referred to as a ‘Split Payment’ model. This is the next step in tackling the non-payment of VAT by some overseas traders selling goods online to UK consumers.
A call for evidence will be published on 20 March 2017.
The government will provide an extra year, until April 2019, before Making Tax Digital is mandated for unincorporated businesses and landlords with turnover below the VAT threshold.
HMRC large business risk review
HMRC will work constructively with businesses and interested parties to consult over the summer on its process for risk profiling large businesses and promoting stronger compliance.
The consultation will be released ahead of the summer recess and will run for 12 weeks.
Disclosure of indirect tax avoidance schemes
As announced at Autumn Statement 2016, legislation will be introduced in Finance Bill 2017 to strengthen the regime for the Disclosure of Indirect Tax Avoidance. Provision will be made to make scheme promoters primarily responsible for disclosing schemes to HMRC and the scope of the legislation will be extended to include all indirect taxes, including the Soft Drinks Industry Levy. Details of the tests to apply to arrangements to determine if they should be disclosed to HMRC will be contained in regulations.
These measures will come into effect on 1 September 2017.
VAT penalty changes in fraud cases
As announced at Autumn Statement 2016, the government will legislate in Finance Bill 2017 to introduce a penalty for participating in VAT fraud. Following consultation on the draft legislation some minor changes have been made to improve the clarity of the measure and also to limit the naming of a company officer to instances where the amount of tax due exceeds £25,000.
The new penalty will take effect once the Finance Bill receives Royal Assent.
The full set of Spring Budget documents can be viewed here.
Contact us if you would like further information on any of these measures.