UK – VAT measures announced in the Budget
The Chancellor announced in the UK Spring Budget new measures for tackling VAT avoidance and evasion, together with an increase in the registration and de-registration thresholds.
VAT Avoidance
The elimination of the use and enjoyment provisions for business to consumer mobile phone services was one of the measures. The reason for this change was to resolve the variation where UK VAT is applied to mobile phone use by UK residents when in the EU, but not when outside the EU. In its place, UK VAT will apply to all charges for the services. This will safeguard against mobile phone companies trying to use the inconsistency to avoid UK VAT and bring UK VAT rules into line with the internationally agreed method. There will be more details on this published soon.
VAT Evasion
This measure is following up on the announcement from the 2016 Budget, in which the Government is looking to tackle overseas sellers that use online marketplaces for sales inside the UK. VAT evasion is taking place due to overseas sellers charging UK VAT to consumers, yet not registering or declaring and paying that VAT to HMRC. This is allowing them to undercut online and high street retailers on price.
Shortly the Government will announce a call for evidence on the case for a new VAT collection mechanism for online sellers. This will harness technology to allow VAT to be removed right away by the Exchequer from online transactions at the ‘point of purchase’. Usually referred to as a ‘Spilt Payment’ model. This is the subsequent step in attempting to stop the non-payment of VAT by some overseas traders selling goods online to UK consumers.
The HMRC has issued a ‘call for evidence’ in respect of this change, they need to be received by June 2017.
VAT Registration & De-registration Thresholds
On the 1st April, 2017 the VAT registration threshold for established businesses will increase from £83,000.00 to £85,000.00 and the de-registration threshold will also increase from £81,000.00 to £83,000.00.
