VAT: new rules for zero- rate relief on adapted motor vehicles for disabled wheelchair users

New rules for VAT relief on substantially and permanently adapted motor vehicles for disabled wheelchair users, which are intended to end the abuse of the current scheme, come into force on 1 April 2017.

The rules will specify a limit on the number of vehicles within a specified period of time that an individual can purchase, and require an electronic or written submission of the eligibility declaration form published on Gov.uk. Motor dealers selling adapted motor vehicles under this relief will also be required to provide sales information to HMRC within a specified time frame. Individuals who are in breach of these requirements may be denied zero rate relief or may be subject to a section 62 Value Added Tax Act (VATA) 1994 penalty if the declaration they make is incorrect.

The new rules include provisions allowing exceptions to the limit on the number of cars purchased, for example in cases where the medical needs of the wheelchair user change.

Further information can be found on Gov.uk here.

 

Spring Budget 2017 – VAT Changes

VAT registration and deregistration thresholds

The VAT registration and deregistration thresholds will increase in line with inflation as follows:

  • the turnover threshold which determines whether a person must be registered for VAT, will be increased from £83,000 to £85,000
  • the turnover threshold which determines whether a person may apply for deregistration will be increased from £81,000 to £83,000
  • the registration and deregistration threshold for relevant acquisitions from other EU member states will also be increased from £83,000 to £85,000

These changes will be effective from 1 April 2017.

VAT ‘split payments’ model to tackle evasion

As announced at Budget 2016, in addition to the measures it has already introduced to tackle the problem of overseas businesses selling goods to UK consumers via online marketplaces without paying VAT, the government is considering alternative methods of collecting VAT. The government will publish a call for evidence on 20 March 2017 on the case for a new VAT collection mechanism for online sales. This would harness technology to allow VAT to be extracted directly from transactions at the point of purchase and sent to HMRC. This type of model is often referred to as ‘split payment’.

Use and enjoyment provisions for business to consumer mobile phone services

The government will remove the VAT ‘use and enjoyment’ provision for mobile phone services provided to consumers. This will create an extra VAT cost in relation to mobile telephone use – including data – where the device is being used outside of the EU. Under current VAT rules such charges to individuals do not incur UK VAT but in future holiday makers and business travellers will pay 20% VAT.  The measure will bring those services used outside the EU within the scope of UK VAT. It will also ensure mobile phone companies can’t use the inconsistency to avoid UK VAT. This will come into force from April 2017. Secondary legislation to effect the change will be published before summer recess.

VAT fraud: the provision of labour in the construction sector

The government will launch a consultation on 20 March 2017 on a range of policy options to combat supply chain fraud in supplies of labour within the construction industry. Options include a VAT reverse charge mechanism so that the recipient accounts for VAT. It will also consider other changes including to the qualifying criteria for gross payment status within the Construction Industry Scheme. The government is consulting to ensure any option taken forward is targeted effectively, is simple to operate and minimises impacts on businesses, whilst tackling the fraud as effectively as possible.

A consultation document will be published on 20 March 2017.

VAT Disclosure of Schemes Regime (‘VADR’): consulting on reform

As announced at Autumn Statement 2016, and following consultation, the government will legislate in the Finance Bill 2017 to strengthen the regime for disclosure of indirect tax avoidance. Provision will be made to make scheme promoters primarily responsible for disclosing schemes to HMRC and the scope of the regime will be extended to include all indirect taxes. Details of the tests to apply to arrangements to determine whether they should be disclosed to HMRC will be contained in regulations.