Value Added Tax

VAT Registration Thresholds

With effect from 1 April 2015, the VAT registration threshold will be increased from £81,000 to £82,000. The deregistration threshold will be increased from £79,000 to £80,000. The registration and deregistration thresholds for acquisitions from other EU member states will be increased from £81,000 to £82,000.

VAT Deductions Relating to Foreign Branches

Following the CJEU decision in Credit Lyonnais amendments to the VAT Regulations will mean that:

  • calculations of recoverable input tax using the partial exemption standard method must exclude supplies made by establishments outside the UK;
  • calculations of recoverable input tax using a partial exemption special method must exclude supplies made by establishments outside the UK;
  • the use-based calculation for ‘out-of-country’ supplies is limited to supplies made from establishments within the UK.

The changes will have effect from the first day of a business’s longer period which commences on or after 1 August 2015.

Power to Make Refunds to Named Bodies

Government departments are permitted to obtain refunds of VAT which they incur in relation to non-business activities. However, this does not extend to non-departmental public bodies and similar arm’s-length bodies.
A future Finance Act will provide that the Treasury may, by order, name any such bodies as ‘specified bodies’, with the result that they will be able to recover the VAT which they incur on non-business activities. The aim of the measure is to prevent VAT from being a disincentive to cost-sharing arrangements between such bodies, which currently give rise to irrecoverable VAT.
Any hope of a windfall by a specified body will, however, be short lived; since the recipient will be government-funded, the extent of the funding will be adjusted downwards to take account of the VAT which is now recoverable.