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Budget 2012 - VAT

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21 March 2012

The registration and deregistration thresholds are increased by £4,000 to £77,000 and £75,000 respectively with effect from 1 April 2012.

Fuel scale charge
The figures for the amount of output VAT to account for in respect of fuel provided for private motoring are shown on our “Tax Facts” card. The figures are based on carbon dioxide (CO2) emissions, and come into effect in the first VAT return period beginning on or after 1 May 2012.

“Addressing borderline anomalies”
A Consultation Document (closing date for responses – 4 May 2012) has been published in which HMRC set out their proposals for aligning the VAT treatment of similar products which are currently taxed differently, and for closing perceived loopholes which they believe can be used to avoid VAT.

In all cases, HMRC’s proposed measures will come into effect on 1 October 2012, and will be accompanied by anti-forestalling provisions to prevent artificial prepayment arrangements being put in place prior to that date.

The areas covered are the following:

  • Approved alterations to protected (listed) buildings
    The present VAT zero-rating is to be removed from:
    - the supply of building services and associated building materials in the course of an approved alteration of a protected building
    - the first sale or grant of a long lease in a “substantially reconstructed” protected building (except where the building is reconstructed from a “shell”).
    The VAT treatment of alterations to protected buildings is therefore aligned with the treatment of repairs to such buildings, and indeed with that applicable to alterations to other types of building.

    Transitional arrangements applying until 20 March 2013 will protect zero-rating for contracts already in place on Budget day.

  • Hot food and premises
    Measures are to be introduced to clarify the definitions of “hot takeaway food” and food for consumption “on the premises”, such that the following supplies will be standard-rated:
    - the sale of all hot food, with the exception of freshly baked bread
    - food sold for consumption in areas adjacent to the food retailer (e.g. tables/chairs outside) or shared with other retailers (e.g. a food court)

  • Self storage and hairdressers chair rentals
    The following supplies are to be added to the list of items which are not covered by the general VAT-exemption for supplies of land:
    - the provision of self-storage facilities
    - the provision of salon space by a salon to a self-employed stylist
    Suppliers of this type of service will no longer be able to argue that they are providing a “licence to occupy land” to avoid charging VAT.

    Accordingly supplies of self-storage facilities will become subject to VAT. The new measures are a direct response to two recent cases where HMRC have been defeated at the First Tier Tribunal.

    As far as chair rentals are concerned, HMRC have always regarded the supply as being the taxable provision of salon “facilities”.

  • Holiday caravans
    Zero-rating will no longer apply to the sale of a caravan which is not designed and constructed for “continuous year round occupation”. A caravan will only be considered to be thus designed and constructed if it is manufactured to British Standard BS 3632 or equivalent which applies to residential caravans.

  • Sports nutrition drinks
    VAT law states that the sale of “beverages” should be standard-rated. HMRC propose to introduce a new category into the list of food / drink items which override the general zero-rating provisions to ensure that sports nutrition drinks are taxed at the standard rate in the same way as other “beverages”.

Other Matters

  • Freight transport services performed wholly outside the EU
    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 are to be formalised.

  • Invoicing rules
     Minor changes to simplify the UK VAT invoicing rules are to be introduced from 1 January 2013 to conform with the EU Invoicing Directive.

  • Providers of education
    The VAT exemption for providers of education, in particular at university degree level, is to be reviewed in Finance Bill 2013 to ensure that commercial universities are treated fairly.

  • Charitable buildings
    Measures will be introduced in Finance Bill 2013 to remove charitable buildings from the scope of the VAT reduced rate for the supply and installation of energy-saving materials .
Confirmation of previously announced measures
  • Cost sharing exemption
    A VAT exemption for services shared between VAT exempt bodies including charities and universities will be introduced in Finance Bill 2012.

  • Status of public bodies 
    Finance Bill 2012 will include provisions to amend UK law to ensure that there is clear transposition of EU agreements relating to the VAT treatment of public bodies carrying out their statutory duties in competition with the private sector. |

  • VAT grouping extra statutory concession
    Finance Bill 2012 will include provisions to bring a long standing concession on the valuation of certain reverse charges applicable to VAT groups into law.

  • Low value consignment relief
    VAT relief will no longer apply to low value imports from the Channel Islands, with effect from 1 April 2012.

  • Online registration and online filing
    An online system for VAT registration, de-registration, and changes to business details will be introduced with effect from 31 October 2012. From the same date, certain VAT forms will be removed from the law.

  • Overseas traders
    The VAT threshold for businesses not established in the UK will be removed from 1 December 2012. From this date, such businesses will need to register for VAT as soon as they make any taxable supplies in the UK.

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