| Turnover limits
The VAT registration turnover limit rises to £60,000 from
1 April 2005. The deregistration limit increases to £58,000.
There are no changes to the turnover limits for the cash accounting,
annual accounting and flat rate schemes.
Disclosure rules
The disclosure rules are extended to schemes that give a tax advantage
that does not appear on a VAT return. For example, the advantage
might involve VAT that cannot be deducted because it relates to
exempt supplies or non-business activity. Currently, businesses
need only disclose use of a scheme when it has made a difference
to the figures on their VAT return.
Two new schemes will join the list of specific schemes that businesses
must disclose if their turnover is £600,000 or more. One scheme
exploits differences between the UK and another EU member state’s
treatment of vouchers. The other scheme attempts to remove the effect
of an election to waive exemption on supplies of land and property.
A new ‘hallmark’ of avoidance is introduced to require
a disclosure of schemes that make use of face value vouchers with
low redemption rates. The changes will take effect after Royal Assent
on dates to be announced.
Partial exemption
Some changes are made to the partial exemption rules from 1 April
2005 to address weaknesses in the calculation methods. In future,
approval or direction of a special method will have to be in writing.
Customs will be able to override special methods more often. Another
change removes the benefit of rounding-up in the standard method
for businesses with ‘residual’ input tax of £400,000
a month or more.
Unjust enrichment
Customs will be able to refuse VAT repayment in a wider range of
circumstances, where businesses have accounted for VAT incorrectly
charged to customers. At present, Customs can refuse a VAT repayment
on the grounds of ‘unjust enrichment’ only to the extent
that a business has overpaid VAT. The measure extends the defence
of unjust enrichment to all claims for refunds of overcharged and
over-accounted for VAT, regardless of whether they are in a payment
or repayment position on individual VAT returns. The measure will
apply to all claims for a credit of VAT made after 22 March 2005.
Place of supply
Some UK businesses registered for VAT have to account for VAT on
natural gas and electricity received from suppliers established
outside the UK, following changes introduced from 1 January 2005.
A new rule effective from 17 March 2005 establishes that the value
on which VAT is to be accounted for is the consideration payable
to the supplier.
Local authorities
Local authority provision of certain services, such as childcare
and welfare, will be reclassified as non-business activities rather
than exempt activities for VAT purposes from 1 April 2005. This
will remove the present restriction on VAT refunded to local authorities
when they provide these services.
Charities and communities
From a date to be announced, the 5% reduced rate of VAT will be
extended to certain supplies of advice or information connected
with or intended to promote the welfare of elderly or disabled people
or children, except where the goods and services are exempt from
VAT.
An interim grant scheme to cover VAT costs incurred by charities
in the construction, renovation and maintenance of memorials will
be introduced while the government negotiates at the European level
for a permanent reduced rate.
The government will make special donations equivalent to the VAT
collected from fund-raising activities for Tsunami relief, and the
VAT collected on the Band Aid single and Live Aid DVD.
VAT fuel scale charges
New scales apply from the start of the first accounting period beginning
after 30 April 2005. |