Romford Essex Accountants Blog: Budget 2012 - VAT And Indirect Taxes

CHANGES TO VAT REGISTRATION AND DEREGISTRATION THRESHOLDS

From 1 April 2012, the taxable turnover threshold, which requiresa person to register for VAT, will be increased from £73,000 to £77,000 per annum; the threshold below which a VAT-registered person may apply to deregister will be increased from £71,000 to £75,000 per annum, and the relevant registration and deregistration threshold for Intra-Community acquisitions will also be increased from £73,000 to £77,000 per annum.

The simplified reporting requirement for the income tax Self Assessment return will continue to be aligned with the VAT registration threshold.

VAT ONLINE REGISTRATION

The online VAT registration system will be introduced with effect from 31 October 2012. Consequently, certain VAT forms will be removed from VAT law on the same date. From 1 December 2012, the VAT threshold for businesses
not established in the UK will be removed.

VAT RELIEF FOR EUROPEAN RESEARCH INFRASTRUCTURE CONSORTIA (ERICs)

VAT relief will become available for European Research Infrastructure Consortia through Secondary legislation to be introduced in the autumn of 2012.

INSTALL ATION OF ENERGY-SAVING MATERIALS IN CHARITABLE BUILDINGS

Legislation will be introduced in Finance Bill 2013 to reduce the scope of the reduced rate applicable to the installation of
energy-saving materials. It will no longer apply to installations in buildings for a relevant charitable purpose, but remain for residential buildings, including those operated by charities.

ZERO RATE FOR ADAPTED MOTOR VEHICLES AND BOATS FOR WHEELCHAIR USERS

The Government has announced it plans to introduce a voluntary disclosure scheme in order to gather information about the use of this relief,which is often abused because of different interpretations and its difficulty to administer.

INVOICING RULES

As a result of the EU Invoicing Directive, the UK Government will introduce secondary legislation effective from 1 January 2013, simplifying the rules for VAT invoices.

UNIVERSAL CREDIT CONSEQUENTIAL CHANGES

Changes will be introduced by statutory instrument from 1 April 2013 to ensure that all universal credit claimants can obtain the same reliefs as were available to claimants of the benefits it replaces. The changes will apply to certain zero and reduced rate provisions.

CONSULTATION ON EXEMPTION FOR SUPPLIES OF EDUCATION

The Government is planning a consultation on the VAT exemption for providers of education with a view to ensuring commercial universities are treated fairly.

FREIGHT TRANSPORT SERVICES

There are currently temporary provisions in place to ensure transport and related services performed wholly outside the EU are not liable to UK VAT where the recipient is a UK business or charity. In the autumn of 2012, the Government will introduce secondary legislation to formalise these arrangements.

TREATMENT OF SMALL CABLE-BASED TRANSPORT

Such services are currently subject to the standard rate of VAT, but will become subject to the reduced rate in 2013. The change will apply to vehicles that carry fewer than 10 people and will be evaluated after three years. A consultation will precede the changes, in the summer of 2012.

TOBACCO DUTY

With effect from 6pm on 21 March 2012 the rate of duty increases on all tobacco products imported into, or manufactured in, the UK by 5% above retail price inflation. This will have the effect of increasing costs at the point of sale as follows:

• 37p to a packet of cigarettes and a 25g of handrolling tobacco;
• 20p to a 25g packet of pipe tobacco, and

• 12p to a packet of 5 small cigars.

MACHINE GAMES DUTY (MGD)

The taxation of gaming machines is to be reformed in order to put tax revenues from gaming machines on a more sustainable footing. MGD will be charged on the net takings from playing dutiable machine games. These are games played on a machine where customers hope to win a cash prize greater than their stake. The changes are introduced on 1 February 2013.

These changes are introduced after the issue of two consultation documents in 2009 and 2011. Where MGD is payable, it will replace both Amusement Machine Licence Duty and VAT. There will be two rates of MGD. The lower 5% rate will apply to machines with maximum stakes of 10p and maximum cash prizes of £8, and the standard 20% rate will apply to all other dutiable machine games.

AGGREGATES LEVY

The planned increase in the aggregates levy rate from £2.00 to £2.10 per tonne has been delayed until 1 April 2013.

LANDFILL TAX

The standard rate from 1 April 2012 is £64 per tonne and from 1 April 2013 this increases to £72 per tonne.

The lower rate remains at £2.50 per tonne.

STAMP DUTY LAND TAX (SDLT): SDLT AVOIDANCE

The SDLT legislation is to be amended for transactions on or after 21 March 2012 to ensure that an SDLT avoidance scheme, involving the sub-sales rules and an option to purchase land is ineffective.

The grant or assignment of an option will not be able to satisfy the requirements of the sub-sale rules.

SDLT RATE IN RESPECT OF PROPERTY OF OVER £2M

The rate of SDLT charged on the purchase of a residential property for more than £1 million is currently 5%. For properties where the purchase price exceeds £2 million, a new SDLT rate of 7% will be charged where
the effective date of the transaction is on or after 22 March 2012.

Transitional provisions will ensure that the old 5% rate applies for contracts entered into before 22 March 2012 but completed on or after that date.

SDLT RATE : TAXATION OF HIGH VALUE RESIDENTIAL PROPERTIES

A number of high value properties have been purchased in the UK using complicated ownership structures involving companies and/or trusts.

In cases where a UK residential property is purchased for more than £2 million on or after 21 March 2012 and the purchaser is a ‘non-natural person’, the rate of SDLT will be 15%. A ‘non-natural person’ is defined as including companies, collective investment schemes (including unit trusts) and partnerships in which a ‘non-natural person’ is a partner.

The intention is to stop or reduce the number of high value property transactions that are undertaken using such structures. In addition, it is proposed to introduce an annual charge in 2013 on such a property that is
owned by a ‘non-natural person’.