Autumn Budget 2017 - VAT Sometimes it’s what is not said that needs to be noted
It would have been a “brave” Chancellor in a government with such a small majority to have taken forward the ideas appearing in the media to reduce the VAT Threshold to the suggested £25-26,000 levels I think many would agree. It was no surprise to see that no dramatic reduction occurred, but the option still remains in the long term for activity as reviewing the threshold for registration was a core recommendation in the recent Office of Tax Simplification (OTS) report. The registration threshold will remain at £85,000 until 31 March 2020 – notable that it’s a date well past the potential Brexit date of March 2019 – assuming no two year transitional period occurs.
There were 8 core recommendations in the OTS VAT Report published on the 7th November and the Budget commentary confirms that the Chancellor has written to the OTS “setting out how the Government will respond to the recommendations” – so best we watch this space.
The theme of tackling Avoidance and Evasion is repeated from the Spring Budget with news that the “reverse charge” approach to be applied in the construction sector that was first mentioned in the Spring does move forward into draft legislation in Spring 2018, with potential implementation on or after 1 October 2019. Such advance notice will give time to adjust accounting processes in affected businesses but allied to the Making Tax Digital plans for VAT implementation from April 2019 means that quite wide-ranging thought needs to be given to the VAT compliance of accounting systems to ensure accurate reporting – VAT advice and support always on hand from your Centurion team of course.
Another signpost was given to the consultation that’s been undertaken regarding VAT Grouping and 1 December 2017 is when we hope to see the Government publish at least a summary of the responses , if not their plans in that regard.
The other issues to tackle “lost VAT” comes from the Split Payment model – again mentioned in the Spring – which is to tackle issues in the online market place and would look at real time accounting for the VAT amount at the point of the payment being made on the web site concerned. Whilst this is moving forward it is unlikely that we will see any immediate change as the Budget refers to “plans for further engagement with external shareholders”. A period of further consultation will result in 2018 therefore.
With the online market place a place of business growth for large and smaller businesses there probably needs to be great care so as not to stifle such growth continuing especially if we look back to the VAT issues that arose from the Place of Supply changes on Digital services from January 2015 and the market reaction to the Mini One Stop Shop (MOSS) mechanism.
VAT issues around Vouchers have made an appearance in VAT Tribunals and higher courts as HMRC have sought to ensure no VAT advantages are artificially or otherwise created from such implementations. This Budget raises the matter again and there is the intention to implement changes to simplification of the VAT treatment in this area, including the point at which the voucher will become subject to VAT as well as issues around their value for VAT purposes. It’ll be a busy day on the 1 December 2017 as this date is when to look out for the consultation paper on this aspect.
The postponed accounting for VAT on Imports gets a mention in the context of the impact of Brexit indeed this is the only Brexit impact mentioned in the Overview of Tax Legislation and Rate (OOTLAR – Norwegian for “what might happen next” perhaps!) in the context of VAT.
It would be great to hear of the thoughts of Government on the range of Brexit related VAT issues that will impact on all parts of the UK Plc operations – Charities – Third Sector – Businesses Large and Small – online or physical – goods or services related but it would seem that we are still playing the waiting game for clarity in this regard. The Centurion VAT team will continue to raise these VAT issues in all our engagements with government bodies across Wales and Westminster through all avenues accessible to us.
As we often say here at Centurion – VAT -it’s what our people do -so for your VAT Advice needs and Support , whatever the issue, give us a call.