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Autumn Statement 2016 - VAT and indirect tax round-up

In keeping with his predecessor, the Chancellor has shied away from significant VAT changes. The main rule change was an amendment to the Flat Rate Scheme from 1 April next year whereby those on the scheme but having a low cost base will be put onto a higher rate of 16.5%. Those operating the scheme, particularly service providers with low overheads may well be affected and should review their position.

This appears to be in reaction to recently publicised schemes designed to exploit this rule, but could impact uninvolved businesses and traders too.

On the anti-avoidance/evasion front it has been announced that “legislation will be introduced in Finance Bill 2017 to strengthen the regime for disclosure of avoidance of indirect tax” with scheme promoters becoming “primarily responsible” for disclosing such schemes. This is due to take effect from 1 September 2017 and will cover other indirect tax schemes. What is today considered sensible, “vanilla” structuring may well become caught by this regime going forward.

A new and more effective 30% penalty for “participating in VAT fraud” will be added to HMRC’s armory in the Finance Bill 2017. It will target businesses and company officers when they knew or “should have known” that their transactions were connected with VAT fraud.

A new Fulfilment House Due Diligence Scheme will be introduced in 2018 to ensure fulfilment houses assist more fully in tackling VAT abuse by overseas businesses selling goods via online marketplaces. Registration for the scheme will open in April 2018.

On a more positive note, the Government will consult on VAT grouping which could hopefully lead to improvements in the more contentious areas following a plethora of recent cases, and will provide funding for the Retail Export Scheme with a view to full digitisation to reduce administrative nuisance for travellers.

Other indirect tax updates include:

  • The Insurance Premium Tax (IPT) standard rate to rise to 12% from 1 June 2017.
  • The Soft Drinks Industry Levy draft legislation to be published on 5 December 2016.
  • Freeplays in Remote Gaming Duty to be brought more in line with the free bets in General Betting Duty from 1 August 2017.
  • Tobacco Illicit Trade Protocol: Introduction of a licensing scheme for tobacco machinery to allow officials to quickly determine whether machines are being held legally. Applications for licenses will be accepted from January 2018 and the scheme will come into force on 1 April 2018.

If you are affected by any of the issues or wish to discuss any VAT or indirect tax matters further, please get in touch with Richard Collier or your usual Mercer & Hole contact.



Date: 25th November, 2016
Author: Richard Collier


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