VALUE ADDED TAX
Registration and Deregistration
With effect from 1 April 2008, the VAT registration threshold will be increased from £64,000 to £67,000. The deregistration threshold will be increased from £62,000 to £65,000. The registration and deregistration thresholds for acquisitions from other EU member states will also be increased from £64,000 to £67,000.
Extension to the Exemption for Fund Management
With effect from 1 October 2008, the VAT exemption for fund management under VATA 1994, Sch 9, Group 5, items 9 and 10 will be extended to cover:
- closed-ended investment entities which invest in securites and whose shares are included in the UK Listing Authority main Official List;
- funds established outside the UK which are recognised overseas schemes under the Financial Services and Markets Act 2000, ss 264, 270 and 272.
Trust-based schemes will be deleted.
The measure will be introduced by secondary legislation. Draft legislation and guidance will appear on the HMRC website in April.
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 2008. The minimum and maximum CO2 level bands are reduced to 120 g/km and 235 g/km respectively.
The revised charges are:
| CO2 band g/km | VAT fuel scale charge | ||
12-month
period |
3-month
period
£ |
1-month
period
£ |
|
| 120 or below | 555 | 138 | 46 |
| 135 | 830 | 207 | 69 |
| 140 | 885 | 221 | 73 |
| 145 | 940 | 234 | 78 |
| 150 | 995 | 248 | 82 |
| 155 | 1,050 | 262 | 87 |
| 160 | 1,105 | 276 | 92 |
| 165 | 1,160 | 290 | 96 |
| 170 | 1,215 | 303 | 101 |
| 175 | 1,270 | 317 | 105 |
| 180 | 1,325 | 331 | 110 |
| 185 | 1,380 | 345 | 115 |
| 190 | 1,435 | 359 | 119 |
| 195 | 1,490 | 373 | 124 |
| 200 | 1,545 | 386 | 128 |
| 205 | 1,605 | 400 | 133 |
| 210 | 1,660 | 414 | 138 |
| 215 | 1,715 | 428 | 142 |
| 220 | 1,770 | 442 | 147 |
| 225 | 1,825 | 455 | 151 |
| 230 | 1,880 | 469 | 156 |
| 235 or above | 1,935 | 483 | 161 |
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 emission figure should be used. For cars with no emission figures, HMRC have prescribed a level of emissions by reference to the engine capacity.
Reduced Rate: Smoking Cessation Products
A reduced rate of 5% for ‘over the counter’ sales of smoking cessation products was introduced with effect from 1 July 2007, and was originally to apply for one year. Secondary legislation to be laid before Parliament will extend this relief for an unspecified period.
Transitional Period for Claims
Legislation is to be introduced in Finance Bill 2008 providing for a transitional period, ending on 31 March 2009, during which businesses may submit claims for:
- output tax overpaid before 4 December 2006; and
- input tax incurred prior to 1 May 1997 and not claimed.
This measure follows the House of Lords judgements in Fleming and Condé Nast to the effect that the three-year cap on input tax claims (introduced with effect from 1 May 1997) was ineffective since no transitional period had been provided. The Commissioners consider that the judgement applies equally to the three-year cap on claims for overpaid output tax, introduced with effect from 4 December 2006.
Corresponding measures will allow the Commissioners to raise an assessment where the payment of a claim is subsequently found to be incorrect. Such an assessment must be made within 2 years of the end of the accounting period in which the claim is made.
Option to Tax Land and Buildings
A revised Schedule 10 is to be inserted into VATA 1994. The change will be made by Treasury Order and will take effect on 1 June 2008.
The revised schedule will set out the circumstances in which an election to waive exemption (option to tax) may be revoked after 20 years. Since the option was introduced with effect from 1 August 1989, the earliest date for a revocation is 1 August 2009.
To improve the administration of the option and its revocation, several other measures will be incorporated. These relate to:
- opted properties held in a VAT group;
- opted buildings acquired for use as dwellings or relevant residential purpose and bare land acquired for construction of building for such purposes;
- the introduction of a new option to simplify the option to tax process for taxpayers with a number of properties;
- early revocation of an option to tax within a ‘cooling-off’ period;
- the automatic lapse of an option to tax 6 years after the taxpayer ceased to have any interest in a property that they had previously opted to tax;
- the ability, in certain circumstances, to exclude a new building from a previous option to tax; and
- late applications for permission to opt to tax.
Supplies of Temporary Staff
The current VAT concession in respect of supplies of temporary staff by employment businesses is to be withdrawn with effect from 1 April 2009. From that date, VAT will be applied to the total consideration employment businesses receive, including the wages element, in respect of the supplies they make.