Registration and deregistration thresholds/rates of VAT
The VAT registration and deregistration thresholds remain at £85,000 and £83,000 of taxable turnover respectively.
The standard and reduced-rates of VAT remain at 20% and 5%.
VAT on e-publications
With effect from 1 December 2020, a zero rate of VAT will apply to e-publications, so that e-books, e-newspapers, e-magazines, academic e-journals and similar digitised publications will share the same VAT treatment as their physical counterparts.
VAT on essential sanitary products for women
With effect from 1 January 2021, the so-called ‘tampon tax’ will be abolished through the application of a zero rate of VAT on women’s sanitary products.
Cross-border transactions:
1. Postponed VAT accounting on imports of goods, including from the EU
With effect from 1 January 2021, postponed accounting for VAT will apply to all imports of goods, including from the EU. Postponed accounting means that the importer does not pay import VAT when the goods arrive at the UK port or airport. Instead, the importer includes the VAT in Box 2 of their relevant VAT return, and assuming they can claim input tax in full on the goods, the same amount is claimed as input tax in Box 4 on the same return.
This system means that there are no adverse cash flow issues of having to pay VAT and then waiting up to three months to reclaim the input tax, as currently applies to imports from outside the EU.
2. VAT ‘quick fixes’ directive
Legislation will be introduced to simplify rules for the VAT treatment of intra-EU movements of call-off stock, such that no transaction is recognised for VAT until the goods are called-off. There is an element of retrospection in the legislation, as it applies to goods which are removed from the UK on or after 1 January 2020.
VAT on financial services
The government is legislating to clarify when fund management services are exempt from VAT.
More generally, the government will set up an industry working group to review how financial services are treated for VAT and other tax purposes, looking at changes that could help to make the UK a more attractive location for companies used by funds to hold assets.