VALUE ADDED TAX
Registration and Deregistration With effect from 1 May 2009, the VAT registration threshold will be increased from £67,000 to £68,000. The deregistration threshold will be increased from £65,000 to £66,000. The registration and deregistration thresholds for acquisitions from other EU member states will also be increased from £67,000 to £68,000.
Change of Standard Rate
The standard rate of VAT will return to 17.5% from 1 January 2010. The 2008 Pre-Budget Report announced a temporary reduction in the standard rate of VAT to 15% for a 13-month period from 1 December 2008 to 31 December 2009. The reduction was implemented by secondary legislation effective for 12 months. Legislation will be introduced in Finance Bill 2009 for the 15% rate to apply during December 2009 and for the rate to revert to 17.5% on 1 January 2010.
Change of VAT Rate: Anti-Forestalling Legislation
The Finance Bill will include provisions to counter schemes that purport to apply the 15% rate of VAT to goods or services to be supplied on or after the date that the VAT rate returns to 17.5%. The legislation will provide that, in certain circumstances, a supplementary VAT charge of 2.5% will be due on supplies of goods or services on which VAT has been declared at 15%. This will apply where the customer cannot recover all the VAT on the supply and one of the following conditions is met:
- the supplier and customer are connected parties; or
- the supplier funds the purchase of the goods or services (or the grant of the right to receive them); or
- a VAT invoice is issued by the supplier where payment is not due for at least 6 months.
The above provisions have effect on and after 25 November 2008.
A supplementary charge will also apply where a pre-payment of more than £100,000 is made before the rate rise in respect of goods or services (or the grant of a right to receive goods or services) to be provided on or after the date of the rate rise, unless the pre-payment is made in accordance with normal commercial practice in relation to such supplies when no VAT rate increase is expected. This provision will take effect from 31 March 2009, and the supplementary charge will have to be accounted for on the date that the VAT rate reverts to 17.5%.
Opting to Tax Land and Buildings
The procedure for opting to tax supplies of land and buildings, in respect of which taxpayers have made previous exempt supplies, will be simplified with effect from 1 May 2009 with the introduction of a new ‘automatic permission condition’. This is intended to allow more taxpayers to opt to tax without seeking prior permission from HMRC. HMRC will also withdraw a related informal extra-statutory concession with effect from 1 May 2010, and will partly regularise another such concession from the same date.
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 2009. The revised charges are:
| CO2 band g/km | VAT fuel scale charge | ||
12-month
period |
3-month
period
£ |
1-month
period
£ |
|
| 120 or less 505 126 42 | |||
| 125 | 755 | 189 | 63 |
| 130 | 755 | 189 | 63 |
| 135 | 755 | 189 | 63 |
| 140 | 805 | 201 | 67 |
| 145 | 855 | 214 | 71 |
| 150 | 905 | 226 | 75 |
| 155 | 960 | 239 | 79 |
| 160 | 1,010 | 251 | 83 |
| 165 | 1,060 | 264 | 88 |
| 170 | 1,110 | 276 | 92 |
| 175 | 1,160 | 289 | 96 |
| 180 | 1,210 | 302 | 100 |
| 185 | 1,260 | 314 | 104 |
| 190 | 1,310 | 327 | 109 |
| 195 | 1,360 | 339 | 113 |
| 200 | 1,410 | 352 | 117 |
| 205 | 1,465 | 365 | 121 |
| 210 | 1,515 | 378 | 126 |
| 215 | 1,565 | 390 | 130 |
| 220 | 1,615 | 403 | 134 |
| 225 | 1,665 | 416 | 138 |
| 230 | 1,715 | 428 | 142 |
| 235 or more | 1,765 | 441 | 147 |
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.
Changes to the Place of Supply Rules in Relation to Cross-Border Services
With effect from various dates commencing with 1 January 2010, a package of measures is being introduced on an EU-wide basis to counter fraud, and to simplify and modernise the VAT system in relation to cross-border supplies of services.
The main changes include:
- the default place of supply in relation to business to business services will be where the customer is established, subject to certain exceptions;
- changes to the time of supply rules in relation to cross-border services;
- UK businesses will be required to submit EC sales lists in respect of services supplied to businesses in other member states, where the customer is required to account for VAT under the reverse charge procedure;
- changes to the procedure by which a business established in one member state may seek a refund of VAT incurred in another.