Registration and Deregistration
With effect from 1 April 2007, the VAT registration threshold (the annual taxable turnover limit which determines whether a person must be registered for VAT) will be increased from £61,000 to £64,000. The deregistration threshold will be increased from £59,000 to £62,000. The registration and deregistration thresholds for acquisitions from other EU member states will also be increased from £61,000 to £64,000.

Car Fuel Scale Charges
The scale used to charge VAT on fuel used for private motoring in business cars will be amended from the start of the first VAT period beginning on or after 1 May 2007. The revised scale charges are based on CO2 emissions, rather than the size of the engine. The revised charges are:

Emission figures which are not multiples of 5 are rounded down. In the case of bi-fuel cars, which have two emission figures, the lower figure should be used. For cars with no emission figures, HMRC have prescribed a level of emissions by reference to the engine capacity.

Transfer of Going Concern
Where a business is transferred as a going concern, the seller is to keep his business records unless the buyer retains the seller’s VAT registration number. The seller must, and HMRC may, make information available to the buyer to enable him to comply with his VAT obligations.

Formerly, the records were normally transferred to the buyer. The change will be effective in relation to transfers taking place on or after 1 September 2007.

Joint and Several Liability: Supply Chain where VAT is Unpaid
Where a supply of specified goods (currently telecommunications and computer equipment) is made to a taxable person who knows or has reasonable grounds to suspect that VAT would go unpaid somewhere in the supply chain, HMRC may direct that that person is jointly and severally liable for the missing VAT.

With effect from 1 May 2007, the list of specified goods is to be extended by Order to include certain sorts of electronic equipment of a kind ordinarily owned by individuals for leisure, amusement or entertainment. The Order will also clarify that satellite navigation systems are to be regarded as computer equipment.

In addition, amendments to VATA 1994, s 77A by the Finance Bill will allow HMRC to alter the circumstances in which a person is presumed to have reasonable grounds that VAT would go unpaid.

Land and Buildings
From 21 March 2007, a surrender of an interest in land for no consideration will be treated in the same way as the grant of a new interest or an assignment of an existing interest to another person.

From 1 September 2007, the legislation that was introduced in 2003 to prevent ‘Lennartz accounting’ on land and buildings will be repealed. The period over which VAT charges on non-business use are paid will be reduced from 20 years to 10 years (in line with the capital goods scheme). This will mean that 10% of the full cost of the building will be taken into account in calculating non-business use charges each year.

Reduced Rate: Smoking Cessation Products
The reduced rate of 5% is to apply to ‘over the counter’ sales of smoking cessation products (patches, gums, inhalators and other pharmaceutical products held out for sale for the primary purpose of helping people quit smoking), other than those already zero-rated as a result of being dispensed on prescription. The reduced rate will only apply for one year.

The operative date of the change is expected to be 1 July 2007.

Alterations to Housing for Elderly People
The reduced rate of 5% is to apply to certain housing alterations for elderly people. The change is expected to come into effect on 1 July 2007, following discussion with representative groups.