Budget VAT update 2008

Registration

The VAT registration threshold increases to £67,000 with effect from 1 April 2008.

From the same date, the turnover at which you can ask to deregister increases to £65,000.

Road fuel scale charges

If your business provides fuel for private use, and you choose to account for this by way of scale charges, you should be aware that the rates will increase with effect from 1 April 2008.

For details of the charge for your car(s) see the revised HMRC Notice 700/64.

New 5% rate on certain pharmaceuticals

This applies to smoking cessation products with effect from 1 July 2008.

Errors on VAT etc., returns: new deminimis limits

This applies to returns rendered in respect to returns commencing on or after 1 July 2008.

At the time of writing, if an error is discovered in an earlier return, and the amount of tax involved was £2,000 or less, it was not necessary to make a formal disclosure to HMRC. The amount could be adjusted on the next return.

There is now a dual range of limits which to some extent takes into account the size of the business. When the revised limits take effect you will not need to disclose errors that fall within the following limits

  • Not more than £10,000

  • More than £10,000, but not more than 1% of the net output value on the return, subject to a ceiling of £50,000.

  • If the amount exceeds £50,000 a formal disclosure is mandatory, regardless of the size of the business.

There are similar increases (with slight variations) for errors in the following indirect taxes:

  • Air passenger duty

  • Insurance premium tax

  • Landfill tax

  • Aggregates Levy

  • Climate Change Levy

Wider application of exemption for certain fund management & admin services

The range of investments that qualify for this exemption will be enhanced with effect from 1 October 2008.

Withdrawal of relief on hire of staff concession

This will have an important impact on charities, healthcare & welfare providers, financial institutions, and educational establishments. Also affected will be employment bureax, who might find their profits squeezed if they are working on a VAT inclusive basis.

HMRC plans to withdraw the extra-statutory relief on the employment costs of temporary workers with effect from 1 April 2009.

Time limits for refund claims

This is will affect businesses that have been established for some time, and have overpaid VAT in error during the periods stated. While the amounts overpaid in respect of any one return may not be significant there is the potential for a refund over a very long period of time.

It is worth reviewing the distant past in case there has been an ongoing error as this may well result in a significant repayment.

Following from the success of Conde Naste & Fleming t/a Bodycraft,  taxpayers can claim refunds of VAT overpaid for the following periods:

  • Input tax not claimed: 1 April 1973 to 1 May 1997

  • Output tax overpaid: 1 April 1973 to 4 December 1996

The Government has now introduced a time limit for making these claims. Claims received by HMRC on or after 1 April 2009 will not be entertained.

Option to tax leases of commercial property

This will have important consequences for the property ownership sector, which already has to wrangle with some of the most complex legislation in VAT.

A number of changes will be brought in with effect from 1 June 2008.

Among these is the right to revoke the option to tax after 20 years, subject to certain conditions. This will not be available until 1 August 2009.

There are other changes with regard to:

  • Opted properties in VAT groups

  • Opted buildings or land acquired for housing or residential development

  • A simplification measure for taxpayers with more than one opted property

  • A cooling-off period in which one can revoke a misguided option

  • The lapse of an individual taxpayer's option 6 years after the disposal of that taxpayer's entire interest

  • The exclusion of a new building from a previous option to tax

  • Clarification of the position regarding a late application for an option to tax.

  • New rights of appeal

  • Consequential changes in other legislation to accommodate the redrafted Schedule 10.

None of the fine detail had been published at the time of writing