UK Budget 2012
21-03-2012
VAT specific announcements
Correcting VAT anomalies and closing loopholes
Since VAT was introduced in the UK, the legislation determining the tax treatment of goods and services has largely remained the same. As a result, some anomalies have arisen either due to the way businesses have evolved and become more sophisticated when carrying out transactions or from litigation decisions. This has challenged the boundaries of relief available for certain transactions within the UK zero-rating and exemptions provisions. Of course, these provisions have also been subject to abuse by fraudulent and non-compliant businesses.
Therefore, HMRC is introducing a number of measures to simplify and clarify those anomalies.
In particular, measures will be introduced in 2012 to:
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clarify the treatment of catering to ensure that all hot takeaway food is taxed and to clarify the meaning of premises;
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tax sports nutrition drinks to ensure that all sports drinks receive the same tax treatment;
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remove exemption from self storage to ensure all supplies of storage receive the same tax treatment and to counter avoidance;
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remove the anomaly whereby approved alterations to certain listed buildings are zero-rated whilst alterations to other buildings, and repairs and maintenance to all buildings are standard rated;
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put beyond doubt the fact that VAT applies to the rental of hairdressers’ chairs;
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ensure that holiday caravans are taxed consistently at the standard rate of VAT.
Previous draft legislation to be finalised
The draft legislation for the following measures will be finalised and introduced in the Finance Bill 2012:
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low value consignment relief
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cost sharing exemption
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tackling VAT fraud on imported road vehicles
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online registration
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grouping extra statutory concession
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supplies of goods or services by public bodies
Minor changes
A series of changes of less importance to most larger businesses include:
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With effect from 1 April 2012, raising of the VAT registration annual turnover threshold from £73,000 to £77,000, the deregistration threshold from £71,000 to £75,000, and the registration and deregistration threshold for relevant acquisitions from other EU Member States from £73,000 to £77,000;
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new, slightly higher, VAT fuel scale charges;
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introducing a VAT relief for European Research Infrastructure Consortia in autumn 2012
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formalising the temporary arrangements under which supplies of freight transport and related services taking place wholly outside the EU are not liable to UK VAT when performed for UK businesses and charities, also in autumn 2012
Other upcoming changes in 2013 include:
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following the new EU Invoicing Directive, UK VAT invoicing rules will be simplified
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extend the Section 41 VAT Refund Scheme to include certain NHS bodies
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dropping the VAT rate from 20% to 5% on the carriage of passengers on small cable-based transport
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reviewing the VAT treatment of certain educational services
Way Forward
The above is a summary of the changes announced today and presents a number of challenges as well as opportunities to business. For more details and guidance on how to deal with these changes, please contact your Meridian Client Service Team or e-mail info@meridianglobalservices.com.