Budget Spring 2014 – Update
A budget fit for an election - with lots to appeal to the sizeable voting group of pensioners but the VAT headlines were very few. Indeed the VAT relief announced for fuel for air ambulances and inshore rescue boats on investigation is not a VAT relief at all but access to a funding pot to help with fuel costs. The air ambulance charities will access a five year grant of £65k a year and the inland safety boat charities can access a £1m a year grant scheme which will also run for a five year period.
VAT Change to manage – Prompt Payment Discounts:
There was a change in VAT treatment announced which will be effective from the 1 May 2014 for suppliers of telecommunication and broadcasting services to private consumers and impacts those businesses who offer a prompt payment discount to ensure that VAT is accounted for on the actual price paid for the goods rather than , as at present, the discounted value.
This VAT calculation change will extend on 1 Jan 2015 to all types of supplies – goods and services.
VAT on Wholesale Supplies of Gas and Fuel from outside of the UK:
There is a VAT treatment called the “reverse charge” which applies to services bought from suppliers based outside the UK by a UK based business. It’s there to ensure that VAT is accounted for by, effectively, the UK customer on the service as there would not have been VAT charged by the overseas supplier. It aims to stop anti-competitive practices whereby UK businesses would feel encourage to source VAT free services from outside the UK. The UK customer has to create a VAT charge and credit its Output Tax figure to pay this over. The normal VAT recovery rules would then apply as to whether it was able to recover this VAT as Input Tax as well.
This reverse charge treatment is now to be extended to wholesale supplies of fuel and power purchased from outside the UK in a bid to combat a growing concern of the risk of fraud in these large fuel trading markets. It will impact on wholesale gas and power trading companies and the implementation date is to be announced to give them time to prepare but it will not impact on domestic purchasers of fuel supplies.
Annual Duty rises on tobacco products will continue and consultation will start on a minimum excise tax for tobacco and measures to tackle tobacco smuggling. Civil penalties have also been brought it and levied on travellers from outside the EU who bring in goods over the duty free allowances.
The VAT Registration and Deregistration threshold moved slightly upwards to an annual figure of £81k and £79k respectively.
Electronic Services – One to plan for:
With the changes to the place of supply rules due on 1 Jan 2015 the UK government will legislate to introduce the Mini One Stop Shop (MOSS) simplification for those electronic service providers who would otherwise be facing multiple VAT registrations across the EU as a result. Certainly an issue to be watching out for and we have further information at:
Charity VAT Reliefs:
Charities have to fund the VAT on their everyday costs out of the grants they receive or income they generate and there are no widespread VAT reliefs just because they are charities – each relief is very specific in its potential application. For example, a consultation announced in the Budget is to look at the potential reform of the Zero Rate VAT relief as it currently applies to motor vehicles adapted for use by wheelchair users, to include users of lower limb prosthetics as well.
Raise a glass of cheer:
The 1p cut on beer always gets a good cheer and I hope the duty freeze will be a benefit to our Welsh spirit and cider producers.
VAT Rules differ in Public Bodies (NHS trusts, local authorities, Academy Schools) from Business organisations:
Interesting to read in the small print of a specific VAT Benefit (known as section 33) to be given to the London Legacy Development Corporation to ensure they get full VAT recovery on their capital and revenue spend. Trying to ensure the post-Olympic inheritance is maximised in the South East it would suggest. Section 33 relief would be very valuable as it allows full VAT recovery on the VAT on goods and services bought it by the body in order to deliver it’s statutory or non-business activities.
Interestingly (perhaps to us VAT people!) Michael Gove had recently confirmed that this same section 33 VAT relief which benefits schools in local authority control and academies would not be extended to sixth form colleges or general further education colleges.
As organisations particularly public bodies and the third sector look to collaborate together it is important to recognise that the VAT rules that each sector works under may well be different. The Budget talks of expanding the s41 VAT reliefs to health bodies such as the Health Research Authority and Health Education England which would allow those bodies to recover VAT on certain services that they buy in from external providers.