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Autumn Budget - VAT

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22 November 2017
Registration and deregistration thresholds

In response to the Office of Tax Simplification’s report “Value Added Tax: Routes to Simplification”, the government will consult on the design of the registration threshold, but in the meantime will maintain it at the current level of £85,000 for two years from April 2018.

Similarly, the deregistration threshold remains at £83,000.

The Chancellor did note that, although the level of the UK threshold is the highest in the OECD, it does have the benefit of keeping the majority of small businesses out of VAT altogether, and thus he was not minded to reduce the threshold.

Tackling VAT evasion - fraud in the provision of labour in the construction sector

Following a consultation into options for tackling fraud in construction labour supply chains, the government will introduce a VAT domestic reverse charge to prevent VAT losses. This will shift responsibility to the customer for paying VAT along the supply chain to remove the opportunity for VAT to be charged by suppliers but not paid to HMRC. Changes will have effect on and after 1 October 2019.

Import VAT

Businesses currently buying goods from the EU benefit from being able to apply an “EU acquisition” process for dealing with the UK VAT due – for most businesses, this only involves making “in” and “out” entries on the same VAT return, with no cashflow impact. However when goods are imported from outside the EU, a physical payment of VAT has to be made to clear the goods through Customs, with this VAT only being reclaimed later on the VAT return.

The government will take these different treatments into account when considering potential changes following EU exit and will look at options to mitigate potential adverse cashflow impacts.

Vouchers

In December, the government will launch a consultation on simplifying the VAT treatment of vouchers, aiming to ensure that when customers pay with vouchers, businesses account for the same amount of VAT as when other means of payment are used, aligning the UK with similar changes being made across the rest of the EU.

VAT grouping consultation

On 1 December, the government will publish a summary of responses to the VAT grouping consultation document and will consider further the scope of VAT grouping, the issues raised and the impact of any potential changes.

“Making Tax Digital” (“MTD”) implementation

As announced in July and legislated for in the Finance (No. 2) Act 2017, no business will be mandated to use MTD until April 2019. Only those with turnover above the VAT threshold will be mandated at that point, and then only for VAT obligations. The scope of MTD will not be widened before the system has been shown to work well, and not before April 2020 at the earliest.


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Julian Millinchamp - Indirect Tax Director
Julian Millinchamp
Indirect Tax Director Contact details