News
Budget 2008 changes
HMRC noted the following changes to the mechanics of VAT:
Correction of errors: Budget Notice 75
From 1 July 2008, the de minimis level below which VAT errors must
be reported separately to HMRC will go up from £2,000 to at
least £10,000. An upper limit of £50,000 will apply
to certain businesses – see
the Budget Notice 75.
Fuel scale charges
The customary annual increase in fuel scale charges was announced
in Budget Notice 76.
Retrospective claims
If you believe that you have either paid more VAT or claimed less
VAT than you should have in the period from 1 April 1973 to 1 May
1997, you will have to submit your claim for a refund no later than
31 March 2009 – Budget Notice
78.
We wish you luck with finding the supporting documentation.
Changes to the option to tax regime
Budget Notice 79 trails
legislative changes which are to be made with effect from 1 August
2008 with the intention of simplifying the procedures relating to
opting to tax interests in land. No cynical sniggering, please.
The Budget Notice flags changes in the following areas “to improve
practical administration of the option to tax and its revocation
…”:
• 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.
End of “Staff hire concession”
The staff hire concession, which allows employment businesses to
charge VAT only on their profit margin from the supply of temporary
workers, to the benefit of many organisations which are unable to
recover VAT in full – banks, building societies, hospitals, universities
etc – is to be withdrawn with effect from 1 April 2009. Employment
businesses will then have to add VAT to the full cost of the supply,
including the wages element, which will therefore increase the overall
cost to those businesses unable to recover all of the VAT charged.
The only surprise is perhaps that it has lasted as long as it did
– the concession as it currently stands was introduced in 1997 and
was expected to be withdrawn some time in 1998.
• The automatic lapse of an option to tax six years after the
taxpayer ceased to have any interest in 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.
PBR 2006
Partial exemption
Following consultation in 2006, the regulations relating to VAT
partial exemption methods will be amended from 1 April 2007. Details
of the changes can be found here.
MITC fraud
As the result of very legitimate concern over the £billions
of VAT being avoided as a result of Missing Trader Intra-Community
fraud, HMRC is seeking EC approval for a change which will put the
obligation on the purchaser to account for VAT on certain hi-tech
products. Details of the current position can be seen here.
Transfer of going concern
The assets of a business can be transferred free of VAT if the conditions
set out in Article 5, VAT (Special Provisions) Order 1995 are met.
However, s 49, VAT Act 1994 requires that the VAT accounting records
should be transferred too unless HMRC is requested to direct otherwise.
From Royal Assent to the Finance Act 2007, it is intended that the
seller will ordinarily retain the VAT records. The revised law will
also set out the information which the seller must pass to the buyer.
EU expansion
Bulgaria and Romania became members of the European Union from 1
January 2007. The requirements for intra-Community trade set out
in Notice 725 therefore
apply to movement of goods to and from these countries.
Intrastat thresholds
The thresholds referred to in Notice
725 requiring statistical returns for Arrivals and Dispatches
have been increased from £225,000 to £260,000 with effect
from 1 January 2007.
European VAT law
UK VAT legislation is based on European directives. The main European
VAT legislation, previously set out in the 1st, 2nd and 6th EC VAT
Directives, has been consolidated into the recast 6th VAT Directive.
The Recast Directive was published in the Official Journal of the
European Union on 11 December 2006. Its official reference is Directive
2006/112/EC of 28 November 2006.
The intention is that nothing should have been changed by the consolidation
exercise.
Authorised economic operator (AEO)
Businesses with significant intra-EU trade are to be invited to
apply for AEO status, with the intention that authorised businesses
will see a reduction in time and compliance costs. A more cynical
view has been expressed that, rather than a reduction in time and
compliance costs for authorised companies, there will simply be
an increase in time and compliance costs for those who remain unauthorised.
AEO status will be effective from 1 January 2008.
Full details of the application process are still awaited. Details
of the scheme can be seen here.
HMRC expect to be in a position to accept applications from 1 July
2007.
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