Autumn Budget 2017—VAT

This analysis is part of the Lexis®PSL Tax team’s summary of the Autumn Budget 2017.  Some of the links require a LexisPSL subscription. If you are not a subscriber, you can take a free trial here.

VAT registration threshold

The Chancellor has written to the Office of Tax Simplification (OTS) following the publication of its report on routes to simplification for VAT in November 2017. In response to the OTS’ recommendation that the VAT registration threshold be examined, the government will consult on the threshold for VAT registration while keeping the thresholds for VAT registration and de-registration at £85,000 and £83,000 respectively until 31 March 2020 (ie while the consultation takes place).

See: Autumn Budget 2017 (para 3.61), OOTLAR (para 2.39), TIIN: VAT: maintain thresholds for 2 years from 1 April 2018 and Letter from the Chancellor to the OTS, 22 November 2017.

VAT fraud in labour provision in the construction sector

Following a consultation that was launched at Spring Budget 2017 into options for tackling fraud in construction labour supply chains, the government has announced that it will introduce a VAT domestic reverse charge to prevent VAT losses. A response to the consultation will be published on 1 December 2017.

This change will have affect from 1 October 2019, allowing time for the government to consult on the draft legislation (in Spring 2018) and for businesses to prepare for the changes.

The government has also confirmed that it will not amend the construction industry scheme to tackle fraud but it will instead increase its compliance response.

See: Autumn Budget 2017 (para 3.68) and OOTLAR (para 2.40).

Online VAT fraud

FB 2018 will include various provisions to combat online VAT fraud including:

  • an extension of HMRC’s powers to hold online marketplaces jointly and severally liable for any unpaid future VAT of traders (including UK traders) selling on their platforms
  • an extension of HMRC’s powers to hold online marketplaces jointly and severally liable for any unpaid VAT of overseas traders that fail to account for VAT where the online marketplace knew or should have known that the business should be registered for VAT, and
  • a requirement for online market places to ensure that VAT numbers displayed on their websites are valid

Prior to these changes online marketplaces can only be held jointly and severally liable for the unpaid VAT of certain overseas traders under VATA 1994, s 77B. These changes will come into effect on Royal Assent of FB 2018.

As a further measure to tackle online fraud, the government is also looking at introducing a split payment model as a new VAT collection mechanism for online sales. This would harness technology to allow VAT to be extracted directly from transactions at the point of purchase. The government will publish a response in December 2017 to the call for evidence announced at Spring Budget 2017, and a further consultation will be launched in 2018.

See: Autumn Budget 2017 (paras 3.78–3.81), OOTLAR (paras 1.33, 2.41), TIIN: VAT: extending joint and several liability for online market places and displaying VAT numbers online and Guidance note: VAT: extending joint and several liability for online market places and displaying VAT numbers online.

Future developments

  • VAT and vouchers: the government will publish a consultation paper on 1 December 2017 on VAT and vouchers. It wants to ensure that businesses account for the same amount of VAT when payment is made in vouchers. Legislation is expected in FB 2019. See: Autumn Budget 2017 (para 3.64) and OOTLAR (para 2.42)
  • VAT groups: as announced at Autumn Statement 2016, the government is considering making changes to the rules on VAT grouping in light of case law developments (see News Analysis: HMRC seeks feedback on changes to VAT groupings). The government will publish a summary of the responses to the consultation that closed in February 2017 on 1 December 2017, and will consider further whether to make any changes. See: OOTLAR (para 2.37)
  • Import VAT: the government will take into account the benefit of postponed accounting for VAT enjoyed by businesses which import goods from the EU when considering VAT reforms following Brexit. The government will look at options to mitigate any cash flow impacts for businesses. See: Autumn Budget 2017 (para 3.62) and OOTLAR (para 2.44)

Further Guidance

  1. SUMMARY OF KEY ANNOUNCEMENTS AND BACKGROUND
  2. BUSINESS AND ENTERPRISE
  3. INCENTIVISED INVESTMENT
  4. EMPLOYMENT TAXES AND SHARE INCENTIVES
  5. REAL ESTATE TAXES
  6. FINANCE
  7. VAT
  8. TAX ADMINISTRATION AND AVOIDANCE
  9. INTERNATIONAL
  10. ENERGY AND ENVIRONMENT

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Filed Under: Budget

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