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.