By Stephen Beale
VAT Senior Manager
Haines Watts
THE Autumn Budget, the accounting event of the season, surprisingly only produced a handful of changes in VAT. A report earlier in November from the Office of Tax Simplification speculated that the VAT registration threshold would be significantly reduced. On the contrary, the Chancellor decided to freeze the current VAT registration and de-registration thresholds.
From 1 April 2018 until 31 March 2020, the VAT registration threshold has been frozen at £85,000. Businesses that have taxable turnover of £85,000 or more are required to be registered for VAT, while the de-registration threshold will remain at £83,000. By the government not factoring in inflation will inescapably mean more businesses will breach the threshold. The Treasury have estimated that this will bring a further 6,000 businesses into the VAT regime by 2020. We’d advise therefore that businesses that are close to the VAT registration threshold, but not VAT registered, should monitor their taxable sales on a monthly basis. Thus ensuring they register on time and don’t incur unnecessary penalties for late registration.
Import VAT can create challenging cash-flow implications on UK businesses. Still being a member of the EU, UK businesses currently benefit from postponed accounting for VAT when importing goods from EU member states. The government recognises the importance of the cash flow advantage this provides to UK businesses. This will be taken into account when considering potential changes following EU exit. The government will also search for options to mitigate any cash flow impacts.
Moving on to unpaid VAT of overseas traders. It’s expected that the government will legislate HMRC’s powers to hold online marketplaces Jointly and Severally Liable (JSL) for unpaid VAT. This includes both UK businesses who fail to account for VAT, and non-UK businesses selling goods, who fail to account for VAT, where they’re not registered for VAT and where the online marketplace knew or should have known that the business should be registered for VAT in the UK. Online marketplaces will need to ensure that third-party VAT numbers are correct and where appropriate, they’re displayed on the platform.
The government will also be introducing a VAT domestic reverse charge to prevent VAT losses in the construction sector, on labour supply chains. This will shift responsibility for paying VAT along the supply chain to remove the opportunity for the VAT to be stolen. These changes will take effect on and after 1 October 2019.
Certain entities that aren’t liable to be registered for VAT can obtain VAT refunds if applicable through a Section 33 claim. The Chancellor’s announced the following additional bodies to be qualifying entities: The Scottish Police Authority; The Scottish Fire & Rescue Service; Combined Authorities; and Fire & Rescue Service Bodies, which become a function of Police and Crime Commissioners.
Should you have any queries or questions about the Budget, concerning VAT or any other tax areas contact Stephen Beale on 01604 746760. Big or small, Haines Watts have dedicated teams, helping ensure our clients reach their destination, with speed and certainty.
