Budget 2008 - summary of VAT issues
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CHANGES
Changes relating solely to VAT
- VAT registration threshold increased from £64,000 to £67,000 from 1 April
2008.
- VAT deregistration threshold increased from £62,000 to £65,000 from 1
April 2008.
- VAT registration and deregistration limits for relevant acquisitions from
other EU Member States increased from £64,000 to £67,000 from 1 April 2008.
- Following the House of Lords decision in the Fleming/Conde Nast case,
claims for repayment of VAT for the tax periods set out below will become
subject to a three-year time limit on 1 April 2009:
- o Tax periods before 4 December 1996 (for output tax previously over
declared)
- o Tax periods before 1 May 1997 (for input tax previously under claimed)
- The legislation relating to the option to tax land and/or buildings will
be simplified, and minor changes will be introduced to enable taxpayers to
revoke an option to tax after 20 years.
- The scope of the VAT exemption for fund management is to be extended from
1 October 2008 to cover UK-listed investment entities (including investment
trust companies and VCTs) and certain overseas funds.
- From 1 July 2008, the Voluntary Disclosure threshold increases £2,000 to
the greater of £10,000 or 1% of turnover (limited to a maximum of £50,000).
- The staff hire concession, whereby VAT on supplies of staff can be limited
to just the mark-up/profit element, is to be withdrawn from 1 April 2009
General changes which include VAT
- Finance Bill 2008 will provide for a single legislative framework for
penalties for incorrect returns and a similar single framework for penalties
for failing to notify a taxable activity to be introduced.
- HMRC will be able to accept payments by credit card from Autumn 2008.
- Finance Bill 2008 will include provision for HMRC to be able to set off
repayments due to taxpayers against debts they owe and will also provide for
HMRC’s debt enforcement powers to be modernised and aligned.
- Finance Bill 2008 will include legislation to clarify the powers of HMRC
to examine and search goods and baggage being imported and exported.
- Legislation will be included in Finance Bill 2008 to provide for secondary
legislation to be introduced to change the way appeals against HMRC decisions
are handled (to tie in with the wider Tribunal reforms due to be implemented
in 2009).
- Proposal to alter the time limits for assessment of both direct and
indirect tax - in the case of VAT, the proposal is to extend the current
3-year limit to 4 years on or after 1 April 2010 (a transitional period will
be applied) . HMRC will similarly extend the ability to claim refunds of
overpaid/underclaimed VAT to 4 years.
Changes involving other indirect taxes
- Vehicle Excise duty for private vehicles registered before March 2001
increases by £5.
- Vehicle Excise duty for private vehicles registered from March 2001 for
the most polluting cars (band G) rises to £400 for 2008/09. There are also
(lower) increases for bands C to F.
- Standard rate of landfill tax will be increased to £32 per tonne from 1
April 2008 and to £40 per tonne from 1 April 2009.
- The rate of aggregates levy will increase to £1.95 per tonne from 1 April
2008 and to £2.00 per tonne from 1 April 2009.
- The rates of the Climate Change Levy will be increased broadly in line
with inflation for 2008/09 and 2009/10.
COMMENT
Three-year capping claims
The Budget has provided for a longer than expected transitional period (to
1st April 2009), during which, businesses will be able to make final claims for
pre-4.12.96 overpaid output tax, and pre-1.5.97 under claimed input tax. Such
claims can be made back to 1973, and this transitional period provides certainty
for affected businesses.
Withdrawal of Staff Hire Concession
The withdrawal of the Staff Hire Concession (“SHC”) in April 2009 will have a
significant impact on the exempt sector. The SHC was introduced in 1997 to
remove a tax distortion between employment businesses acting as principals (who
charge VAT on the full value of supplies of staff) and those acting as agents
(who only charge VAT on their commission).
Those impacted by the change will be banks, insurance companies, charities,
healthcare providers etc. and will effectively now create a tax distortion
between employment and temporary staff (in the former where salaries are not
taxed, but in the latter where they will be) at a time when the economic outlook
is uncertain. One distortion has therefore been replaced by another, and you
have to wonder whether a more targeted approach would have better dealt with
HMRC’s concerns.
We trust that this summary will prove useful.
Steve Allen is the
Director of VAT Solutions (UK) Ltd, an established independent firm of Chartered
Tax Advisers, formed by Andrew Needham and Steve Allen. Both not only are
respected tax advisers, but have worked for both Customs & Excise and one of the
top four accountancy firms for many years. This mean that their team know both
sides of the equation and are truly experts in this field.
The company has a cross-section of clients from multi-national companies
through to medium-sized and numerous smaller regional firms of accountants and
solicitors. They produce a regular publication 'VAT Voice', which can be
downloaded directly from their website
www.vatsolutions-uk.com.
