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2016 Budget: VAT Changes and Proposals

Ryan Bevan 16 March 2016 No comments


Summary of VAT changes and measures taken from the 2016 Budget


1. Consultation on penalty for participating in VAT fraud – The government will consult on a new penalty for participating in VAT fraud in spring 2016. Subject to the consultation, the intention is to legislate in Finance Bill 2017.

2. Tackling online fraud in goods – VAT representatives and online marketplace liability – The government will legislate to provide HMRC with strengthened powers for directing the appointment of a VAT representative and greater flexibility in respect of seeking a security, and enable HMRC to hold an online marketplace jointly and severally liable for the unpaid VAT of an overseas business that sells goods in the UK via the online marketplace’s website. (Finance Bill 2016) (46)

3. Fulfilment House Due Diligence Scheme – The government has published a consultation on the ‘fit and proper’ standards that fulfilment houses will need to meet in order to operate. Fulfilment houses will have an obligation to register and maintain accurate records once online registration opens in 2018. They will also have to provide evidence of the due diligence they have undertaken to ensure overseas clients are following VAT rules. The consultation will be used to minimise as far as possible any costs for legitimate businesses. (46)

4. International engagement with the EU and OECD – The government will continue to engage with international bodies in order to explore international solutions to VAT fraud, including looking at alternative mechanisms for the collection of VAT.

5. VAT registration and deregistration thresholds – From the 1 April 2016 the VAT registration threshold will increase from £82,000 to £83,000 and the deregistration threshold from £80,000 to £81,000.

6. Reverse charge on ‘airtime’ services – With effect from 1 February 2016, the government introduced an anti-fraud measure to prevent Missing Trader Intra-Community fraud on wholesale supplies of electronic communications services. This was done by Treasury Order which was laid before the House on 11 January 2016. (47)

7. DCMS extension of museum VAT refund eligibility – The government will broaden the eligibility criteria for the VAT refund scheme for museums and galleries. DCMS today publish guidance on the new criteria, which will enable support to a wider range of free museums from across the UK.

8. VAT refunds for shared services – As announced at Autumn Statement 2014, the government will legislate to enable named non-departmental and similar bodies to claim a refund of the VAT they incur as part of a shared service arrangement used to support their non-business activities, to encourage public bodies to share back-office services, where this results in efficiencies of scale. (Finance Bill 2016)

9. Isle of Man charities – The government will legislate to ensure charities subject to the jurisdiction of the High Court of the Isle of Man are capable of qualifying for UK VATcharity reliefs. (Finance Bill 2016)


See the full 2016 Budget documents here.