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Pre-Budget Report 2009 - short summary of VAT changes

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SteveAllen

Sadly Steve Allen died in July 2011. His wife Leah would like to thank all those who know Steve and helped contribute to his success. She has recommends Steve's clients and anyone who is interested in this article topic to contact Rob McCann from “The Vat people” on (tel) 0161 477 6600 . Please make reference to Steve Allen.


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Issued 10 December 2009

The following short summary of VAT changes arising out of the Pre-Budget Report 2009

1. Reversion to 17.5% Standard Rate
It was confirmed that the standard rate of VAT will revert to the previous 17.5% rate from 1 January 2010. This is as originally intended when the rate reduction was announced in PBR 2008, and goes ahead in spite of protests from businesses, mainly retailers, that the reversion will cause considerable administrative problems.

Anti-forestalling legislation is being introduced that will create an additional 2.5% charge in specific situations where HMRC believe supplies are being invoiced or paid before 1.1.10 outside normal trading patterns in order to charge 15% on supplies to businesses that cannot recover all the VAT charged to them.

2. Flat Rate Scheme
The flat rate scheme percentages were recalculated in December 2008 to reflect the reduction to 15%, but are now being adjusted to reflect both the 17.5% rate and the latest HMRC data about business VAT liabilities in each sector. A comparison with rates prior to December 2008 shows that a number of categories have changed, and whilst a few are lower than they were then, there is an overall increase.

3. Fuel Scale Charge
Fuel scale charges will increase from 1 January 2010 to reflect the 17.5% VAT rate. VAT returns spanning the change date will need to be fairly apportioned.

4. The EU 'VAT Package'
It was confirmed that from 1 January 2010, several changes will be made to the VAT regulations to effect the following VAT Package elements:

  • the requirement to add intra-EU supplies of 'reverse charge' services to EC Sales Lists
  • time of supply changes for intra-EU supplies of 'reverse charge' services
  • a new electronic method of making 8th Directive reclaims of VAT incurred in other EU Member States

5. Enforcement of Court Judgments in VAT Litigation Cases
HMRC are introducing a policy change for VAT litigation cases where a court judgment has been delivered, but it is already known the case will be further appealed. Currently, where a judgment goes against HMRC, they will normally invite refund claims pending the outcome of the appeal to the higher court. However, where a judgment goes in favour of HMRC, they do not consistently seek to collect the tax until the litigation is ultimately finalised. With effect from 1 April 2010, HMRC will adopt a consistent approach by collecting tax following Tribunal and Court judgments in its favour, even if it is known that a further appeal is to be made.

6. VAT and Excise Duties – consultation on penalties for failures to make returns
HMRC have launched a consultation on proposed changes to penalties for failing to make VAT (and excise duty) returns, which will bring them into line with those introduced for direct taxes. The proposed legislation takes account of the fact that indirect tax returns are often made more frequently than direct tax returns. Responses to the consultation are due by 3 March 2010.

7. Working with Tax Agents – further consultation
HMRC issued an initial consultation document on working with agents in Budget 2009. A further document has now been issued with more specific proposals and a summary of the responses to the previous consultation. The new consultation proposes that HMRC should prioritise work on revised procedures for disclosures to professional bodies, measures for deliberate wrongdoing by tax agents, and legislation for agents who make high volumes of repayment claims. HMRC will also work on developing responses to agents with persistent shortcomings in their work that fall short of deliberate wrongdoing.

Steve Allen


About the Author

STEVE ALLEN is the Managing Director of VAT Advisers Ltd, and has more than 19 years’ experience in VAT. Beginning with HM Customs & Excise in 1990, Steve spent 8 years in the Department in a variety of roles such as VAT Insolvency and VAT investigation in Liverpool, and latterly as a VAT Inspector at Wigan VAT Office.

Steve left the Department in 1998 to become a consultant with Latham Crossley and Davies, before joining Ernst & Young. In 2001, Steve formed VAT Solutions (UK) Ltd with a co-Director, and built up a successful practice over 8 years before setting up VAT Advisers Ltd in September 2009.

Steve advises accountants and individual businesses on all aspects of VAT, but in particular, issues concerned with land and property, charities, cross-border trading, and arrears of VAT.

VAT Advisers Ltd,
1 Dundonald Avenue
Stockton Heath
Warrington
WA4 6JT
(t) 01925 212244
(f) 01925 212255
(m) 07810 433927
www.vat-advisers.com



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Article Published/Sorted/Amended on Scopulus 2009-12-21 18:38:11 in Tax Articles

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