Spring Budget 2017—Indirect taxes

Spring Budget 2017—Indirect taxes

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

Soft drinks industry levy

The government has announced the rates that will apply for the purposes of the soft drinks industry levy. The levy was announced at Budget 2016 and will need to be paid by producers and importers of soft drinks with added sugar (see News Analysis: Budget 2016—what will the sugar levy mean in practice?). The levy will be charged on volumes according to total sugar content and will apply from 6 April 2018. The main rate charge for drinks above 5 grams of sugar per 100 millilitres will be 18 pence per litre and the higher rate for drinks with more than 8 grams of sugar per 100 millilitres will be 24 pence per litre. The levy is included in draft FB 2017 (clauses 51–78 and Schedules 15–17) but following consultation, the legislation has been revised to include a criminal offence for evasion of the levy (in addition to some other minor changes).

See: Spring Budget 2017 (para 3.37) and OOTLAR (para 1.33).

VAT—use and enjoyment provisions for business to consumer mobile phone services

The government will remove the VAT use and enjoyment provision for mobile phone services provided to consumers. This will resolve the inconsistency where UK VAT is applied to mobile phone use by UK residents when in the EU, but not when outside the EU. It will also ensure mobile phone companies are unable to use the inconsistency to avoid UK VAT. This removal will bring UK VAT rules into line with the internationally agreed approach. Secondary legislation to effect the change, together with a TIIN, will be published before the parliamentary summer recess.

See: Spring Budget 2017 (para 3.47) and OOTLAR (para 2.29).

VAT—registration and deregistration thresholds

From 1 April 2017 the VAT registration threshold will increase from £83,000 to £85,000 and the deregistration threshold from £81,000 to £83,000, in line with inflation. The registration and deregistration threshold for relevant acquisitions from other EU Member States will also be increased from £83,000 to £85,000 from 1 April 2017, in line with the VAT registration threshold.

See: Spring Budget 2017 (para 3.36), OOTLAR (para 2.27) and TIIN: VAT registration threshold.

Insurance premium tax (IPT)

At Spring Budget 2017, draft legislation to be included in FB 2017 was published to increase the standard rate of IPT to 12% with effect from 1 June 2017 (as was previously announced at AS 2016) and to replace the current anti-forestalling provisions found in Finance Act 1994, ss 67–67C with new ones to be inserted at FA 1994, ss 66A, 66B and 66C that take effect from 8 March 2017.

See: Spring Budget 2017 (para 3.38), OOTLAR (para 1.27) and TIIN, draft legislation and explanatory notes: IPT: standard rate and anti-forestalling.

Future developments

  • VAT: fraud in the provision of labour in the construction sector: the government will publish a consultation on 20 March 2017 on various options to combat supply chain fraud in supplies of labour within the construction sector including: (i) a reverse charge mechanism so that the recipient accounts for the VAT, and (ii) changing the criteria for gross payment status within the construction industry scheme (see Practice Note: Construction industry scheme—sub-contractors' obligations — Registering for gross payment). See: Spring Budget 2017 (para 3.48) and OOTLAR (para 2.30)
  • VAT: ‘split payment’ model: the government will publish a call for evidence on 20 March 2017 on proposals to introduce 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 (often referred to as 'split payment'). This measure is a further step in tackling the non-payment of VAT by some overseas traders who sell goods online to UK consumers and follows the announcement at Budget 2016 in respect of HMRC's increased powers to combat the VAT fraud associated with online marketplaces (see News Analysis: Finance Bill 2016: VAT and online marketplaces). See: Spring Budget 2017 (para 3.49) and OOTLAR (para 2.28)

Further reading

Further analysis on this Spring Budget:

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