VAT & stealth update

This budget update augments the 24 March 2010 update and should be read in conjunction with this.

Zero rating of aircraft: zero rating will be restricted by customer status from 1 January 2011. From that date only aircraft supplied to airlines operating for hire or reward primarily on international routes will qualify. This brings the UK legislation in line with the Directive.

Cross-border supplies of gas heat & cooling: the reverse charge applicable to gas & electricity will also apply to heat and cooling from 1 January 2011.

Postal services: certain services such as delivery by Parcelforce under freely negotiated contracts will be standard rated from 31 January 2011.

Lennartz accounting: if you have taken part in these arrangements with regard to private use of business assets you will need to be aware of some further changes to the legislation. These will take effect on 1 January 2011.

Other matters regarding private use: legislation to be modified with a view to clarifying what constitutes business or non-business use; potential for input tax to be recovered on certain non-business use.

Standard rate increase: will be 20% from 4 January 2011. There will be anti-forestalling provisions but they won’t apply to everyone. Flat rates will increase to reflect the change.

Penalties: some subtle changes with regard to the new penalty regime, but it is still a severe measure, especially when 20% applies; best route is not to go there.

Landline tax: this will not be introduced.