Kingston Smith

Autumn Budget 2017: VAT and Indirect Tax

The Budget produced few if any surprises on VAT. Earlier this month, the Office of Tax Simplification published a report on VAT which created speculation that the VAT threshold would be reduced. However, the Chancellor has decided to leave the limits as they are. The Chancellor did extend measures to attempt to prevent the loss of VAT in respect of online trading.

VAT Registration and De-registration Limits

From 1 April 2018 until 31 March 2020, the VAT registration threshold, above which businesses are required to be VAT-registered, will remain at £85,000. The de-registration threshold will remain at £83,000, and the government will consult on the minor details relating to the thresholds.

KS comment:

Businesses that are close to the limit but not VAT-registered should monitor their sales on a monthly basis so that when they are liable to be registered they apply on time and do not incur unnecessary penalties. The fact that the threshold is not to be reduced will be welcomed by many smaller businesses who would not have appreciated the additional administration that would have been involved.

Extension of Joint and Several Liability (JSL) regarding online trading

The government announced that it will legislate to extend the scope of the JSL rules to hold an online market place liable for:

  • any VAT that a UK business selling goods via the online marketplace fails to account for; and
  • any VAT that a non-UK business selling goods via the online marketplace fails to account for, where the business was not UK VAT-registered and where the online marketplace knew or should have known that that business should have been registered for VAT in the UK.

The government also announced that it will legislate to require online marketplaces to ensure that third-party VAT numbers are correct and, where appropriate, to display them on their platform, with penalties to encourage compliance.

KS comment:

The amount of lost VAT in this area is huge, and any attempts to reduce this will be good for the Exchequer.

VAT: Fraud in the provision of labour in the construction sector

The government will issue a technical consultation on making the customer, instead of the supplier, liable for the VAT under the reverse charge procedure in situations covering the supply of labour in the construction sector.

KS comment:

The Chancellor is considering changing the law in order to try to prevent fraud cases having to be resolved through long and expensive court cases.

VAT refunds to combined authorities

Certain entities are not liable to be VAT-registered, so cannot recover VAT on their costs via their VAT returns. However, if applicable, they can obtain VAT refunds through what is called a Section 33 claim. The Chancellor announced that he would add the following to Section 33(3) in order that these entities can obtain VAT refunds:

  • The Scottish Police Authority;
  • The Scottish Fire and Rescue Service;
  • Combined Authorities;
  • Fire and Rescue Service Bodies, which become a function of Police and Crime Commissioners

This measure will operate from Royal Assent.

KS comment:

This measure makes sense in order to remove an anomaly created mainly by relatively new structures.