How the 2008 Budget affects you

VAT:

• Increased Turnover Thresholds for Registration and Deregistration
• VAT Fuel Scale Charges
  
• Correction of errors on VAT returns
  
• The Capping Legislation
  
• Option to Tax on Land and Buildings
  
• VAT Exemption to Fund Managers
• Extended Aid to help quit smoking
  
• Payment of VAT
  
• Extra Statutory Concessions
• Appeals
• Powers, Deterrants and Safeguards

OTHER INDIRECT TAXES:

• Air Passenger Duty
• Fuel Duty

VAT:

Increased Turnover Thresholds for Registration and Deregistration

With effect from 1 April 2008, the thresholds for registration and deregistration are increased to £67,000 and £65,000 respectively.  The increase will also apply to acquisitions from EC Member States.

For further information see Budget Notice 73

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VAT Fuel Scale Charges

VAT Fuel scale charges for taxing private use of road fuel are now based on the CO2 emissions of the vehicle.  The scale charges are being amended to reflect changes in fuel prices and maintain alignment with those used for direct tax purposes.  Businesses must apply these changes from the start of their next VAT return period starting on or after 1st May 2008.

For further information see Budget Notice 76

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Corrections of errors on VAT returns

Currently, a business is required to make a voluntary disclosure for any errors exceeding £2,000 net.  For amounts less than this, the amount can be adjusted on the next VAT return.

For accounting periods commencing on or after 1st July 2008, a disclosure will only be necessary where the error exceeds the greater of £10,000 or 1% of turnover with an upper limit of £50,000. For errors above £10,000, the turnover test will be applied to the net VAT turnover entered in box 6 of the relevant VAT return period. For errors below these limits an adjustment to the next VAT return should be made.

For more information see Budget Notice 75

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The Capping Legislation

Following the House of Lords ruling in the cases of Michael Fleming (T/a Bodycraft) and Conde Nast Publications Limited, a new transitional period will run to 31 March 2009.  This will allow businesses that either over-declared output tax or under-claimed input tax in the periods between 1st April 1973 and 1st  May 1997 to make a claim.

Businesses now have a one year time limit to prepare and submit any claims for refund.  However HMRC will be amending their powers of assessment so that they can assess for any tax incorrectly reclaimed.

For further information see Budget Notice 78

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Option to tax on Land and Buildings  

HMRC intend to amend the law effective from 1st June 2008 to simplify the rules on the election to waive the exemption (Option to tax).  It will also introduce minor changes to enable taxpayers to revoke an option to tax after 20 years and improve the administration of the option to tax.

The amendments deal with;

1. the rules on opted properties held in a VAT group;
2. new rules on opted buildings and bare land to be used for constructing dwellings and for relevant residential purposes;
3. a simpler option for businesses with a number of properties;
4. an early cancellation of the option within a ‘cooling off’ period;
5. the automatic lapse of an option to tax after 6 years for a business that ceases to have an interest in the property;
6. an exclusion of a new building from a previous option to tax;
7. changes to late applications  for permission to opt to tax;
8. new appeal rights for businesses;
9. changes to the revocation of the option to tax after 20 years; the earliest date an option to tax will be revocable will be 1st August 2009.

We currently have no further information and there may be more changes than those highlighted above. Similarly, the practical effects of the changes outlined will not be known until the legislation is published. So watch this space.

For further information see Budget Notice 79

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VAT exemption to Fund managers.

Following a High Court ruling HMRC will be amending the VAT exemption schedule to cover the management of UK listed investment bodies such as investment trust companies and venture capital trusts.

The exemption will apply to supplies of services made on or after 1st October 2008.

For further information see Budget Notice 74

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Extended Aid to help quit smoking

The reduced rate of 5% for “quit smoking” aids is extended to an unspecified date.

For more information see Budget Notice 77

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Payment of VAT

Credit cards will be accepted for payment of VAT from sometime in the autumn.  HMRC may allow various tax and duty repayments to be offset against other tax debts and there will be modernisation and alignment of direct and indirect tax debt collections.

For further information see Budget Notice 98

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Extra Statutory Concessions.

Currently, some VAT and other indirect tax anomalies are dealt with by extra statutory concession.  Due to the outcome of a recent court case, HMRC have decided to bring some of the concessions within statutory scope by means of Treasury order.  There is not expected to be substantial alterations to the overall scope of the concessions.

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Appeals

A two tier appeals procedure will be introduced in April 2009.  The majority of current VAT appeals will go into tier one and the second tier will be introduced to deal with appeals against the decision of the first tier. There may also be some legislative changes relating to how HMRC should conduct internal reviews.

For further information see Budget Notice 100

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Powers, Deterrants and Safeguards

Changes will be made to HMRC’s powers with effect from 1st April 2009.  The changes will align powers as regards taxes previously managed by HMC&E and the Inland Revenue.  New powers will be introduced and some previous powers will be repealed. There will also be aligned and modernised record keeping powers.

With effect from 1st April 2010, the current time limit for raising assessments relating to under declared VAT will be raised from 3 to 4 years.  Claims for overpaid VAT will also be extended to 4 years. 

For further information see Budget Notice 97

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OTHER INDIRECT TAXES:

Air Passenger Duty

This will be replaced in November 2009 with a new Aviation Duty and payable per plane.  The new tax is not currently the remit of HMRC.

For further information see Budget Notice 72

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Fuel Duty

The duty on fuel will be increased by 2p per litre (ppl) from 1 October 2008, 1.84 ppl from 1 April 2009 and after 1 April 2010 by 0.5ppl above indexation in that year.

For further information see Budget Notice 71

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For further information regarding any of these articles or any other VAT issue, please phone us on 01962 735350 or e-mail us at: vat@thevatconsultancy.com