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Spring Statement 2018 – VAT initiatives

In the Chancellor’s Spring Statement today no major VAT changes were noted, however a few VAT related initiatives have been announced.

The VAT thresholds (£85,000 for registration and £83,000 for deregistration) are set to remain unchanged for the next two years.

1) Following a review by the Office of Tax Simplification (OTS) the government has issued a ’call for evidence’ with respect to the high (by OECD & EU standards) VAT registration threshold that the UK has.  The 28 page document mentions that smaller businesses falling under the threshold are estimated to cost the Treasury up to £2.1 billion for 2017/18, that the threshold acts as a brake on business growth as many traders restrict their sales to stay below the £85,000 limit and that in the EU, the Commission is also looking at simplifying VAT for smaller / SME businesses to reduce the compliance burden.

The government welcomes views from all parties but is particularly interested in hearing from the Tourism, Construction, Accommodation, Food, Tradespeople, Professional/Scientific and IT sectors.  Responses should be sent to the below email address by 5 June 2018: vatthreshold@hmtreasury.gsi.gov.uk

2) A second call for evidence, again with a deadline of 5 June 2018, relates to VAT (as well as Air Passenger Duty) targeted mainly at Northern Ireland.  The reduced rates of VAT available to certain sectors in neighbouring Ireland have for a while now raised the question as to why Northern Ireland cannot similarly benefit.  The government is keen to hear from the following sectors:

Hospitality, Accommodation, Visitor attractions, Business visitors, Events providers, Airlines, Airports, Accounting bodies, related Professional bodies & Trade associations and Economic research institutions. Again, the deadline for responses is 5 June 2018. Representations by email are preferable and should be sent to: NIVATAPDTourismCFE@hmtreasury.gsi.gov.uk

Alternatively, hard copies can be sent to:

VAT, APD and tourism in Northern Ireland

VAT & Excise Team

HM Treasury

1 Horse Guards Road

London

SW1A 2HQ

3) A third consultation calls for comments on HMRC’s proposed ’split payment’ mechanism for online payment.  In essence this looks to ensure that when a UK consumer is paying an overseas online supplier, the net amount charged is remitted to the supplier, however the VAT element that would normally be collected by the supplier and then handed over to HMRC is instead paid directly to HMRC.  This avoids the perceived VAT leakage where some overseas suppliers charge and collect VAT yet fail to remit this to HMRC.

This is a system mooted elsewhere, but there are a number of implications and challenges, not least the Second Payment Services Directive (PSD2) which stipulates that the full amount of a payment by a customer must be transferred to the recipient by the payment provider, and is a requirement of current EU law. However, the split payment model is also being looked at by the EU and further developments there, and with Brexit, could see this initiative develop further.  This is a more complex area and alternatives are also discussed in this consultation.  Responses should be sent by 29 June by email to: indirecttax.projectteam@hmrc.gsi.gov.uk

Alternatively, by post to:

Dympna Kelly

HM Revenue & Customs Indirect Tax Project Team,

Room 3/35

100 Parliament Street

London

SW1A 2BQ

If you are interested in or affected by any of the above please contact me,  Dahlia Patsalides or your usual Mercer & Hole contact.

 

 

Date: 13th March, 2018
Author: Richard Collier

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