The VAT registration and deregistration thresholds will remain the same for the two years from 1 April 2018.
The current registration threshold at £85,000 is the highest in the EU, where the average is £20,000. A recent report published by the Office of Tax Simplification identified that while the high registration threshold avoids 3 million businesses having to register for VAT, there is evidence it distorts competition between businesses that need to charge VAT and those who don’t. The Government will take forward the main recommendation of the report to examine and consult on the future design of the threshold.
"This is a departure from the past where the threshold used to increase each year by one or two thousand pounds in line with inflation. Although a high threshold can benefit smaller business who do not need to register for VAT, it is seen as creating a ‘cliff-edge’ and a bunching effect of businesses choosing to remain below the threshold, which limits their growth. Any reduction to the threshold will need to ensure that it does not simply shift the cliff-edge effect to a lower level and inhibit business growth. The review will also need to take into account the effect on businesses that exceed the threshold and will be required to comply with ‘Making Tax Digital’, which comes into force from April 2019."
Plans for MTD have not changed since the announcements made in July, which were largely legislated for in the recent Finance (No.2) Act 2017.
Under the current timetable, only VAT registered organisations with turnover over the VAT threshold will be mandated into MTD from April 2019. This will be to meet VAT obligations only, by keeping digital records and providing quarterly VAT updates to HMRC. Various exemptions will apply, such as to non-trading charities and those exempt from digital reporting due to infirmity, religion or lack of internet connection. An updated statement of impacts will be published on 1 December 2017.
"HMRC anticipates that most businesses will eventually be required to report digitally for all the main taxes. The technology is currently being developed, with uncertainty as to when the necessary software will become available, including that for VAT. It is not therefore yet clear when HMRC’s vision to expand MTD recording and reporting to other taxes will become a reality. It will not be before 2020, and HMRC has confirmed that the system will need to be shown to work before the scope of MTD is widened. It is estimated that the costs of delays will amount to £585m a year by 2022/23."
New measures are being introduced to extend the powers to make online marketplaces' jointly and severally liable (JSL) for traders' unpaid VAT.
"With the ever expanding volume of business conducted online, it is clear that new technology is needed to combat fraud and ensure that businesses are no longer able to operate via online marketplaces without appropriately accounting for VAT. The split payment model of collecting VAT directly at the point of sale is a departure from the traditional method and could be adopted more widely in order to improve the collection of VAT. It was originally proposed as a method for collecting PAYE/NIC from employee's pay under RTI, but has never been implemented."
The Government is to consult on the VAT implications of vouchers
The Government is to consult on proposals to bring in revised VAT rules around the use of vouchers. The aim is to ensure that, irrespective of whether customers pay with vouchers or other means of payment, businesses account for the same amount of VAT. This will then align the UK with changes being made across the EU from 2019.
"Several recent tax cases have illustrated the complexities of the VAT rules around vouchers. Clarification and simplification of this area should be encouraged."
The Government plans to introduce a domestic VAT ‘reverse charge’ from 1 October 2019, following a consultation on tackling fraud in construction industry labour supply chains.
The reverse charge will shift responsibility for paying VAT along the supply chain. The aim is to prevent VAT losses. The measure will effectively mean that the business recipient of the labour supplies will become liable to account for the VAT under the reverse charge arrangements. The long lead in before being introduced is to give businesses time to prepare for the change.
The Government has confirmed that the shortened 14 day filing and payment window for the Stamp Duty Land Tax (SDLT) return will apply to land transactions with an effective date on or after 1 March 2019.
It was announced in the Spring Budget 2017 that the reduction in the SDLT return filing and payment window from 30 days to 14 days would be delayed until after April 2018. The Government has now confirmed that the shortened window will apply to land transactions with an effective date on or after 1 March 2019. The Government has also announced plans to improve the SDLT return in order to make it easier to comply with the new time limit.
"The shortening of the filing window has caused some consternation among agents responsible for filing returns so pushing back the implementation is welcome, as is the commitment to improve the return that we hope will simplify the process."
The Government has announced the chargeable amounts applicable to the 2018/19 ATED chargeable period.
The chargeable amounts will increase by 3%, in line with the September 2017 consumer prices index (CPI). These increased charges will take effect from 1 April 2018.
"These increases are as expected."
From 22 November 2017, first-time buyers will benefit from relief from paying stamp duty land tax where they pay less than £300,000 for a new residential property. Where a new property costs between £300,000 and £500,000 stamp duty land tax will only be payable on the purchase price in excess of £300,000.
The rules for the 3% surcharge for additional residential properties have been amended to make them fairer for divorcing couples, married couples and civil partners transferring property between each other. In addition, the rules are to be amended to prevent abuse by requiring purchasers to sell the whole of the former main residence and to do so to someone who is not their civil partner or spouse.
Higher stamp duty land tax rates are applicable for purchases of additional residential property in particular circumstances. These rules were introduced in April 2016 and are commonly referred to as the 3% surcharge.
Minor changes have been made to these rules with immediate effect so that relief is available from the 3% surcharge in the following cases:
The Government will legislate in Finance Bill 2018-19 to ensure that stamp duty, stamp duty reserve tax and stamp duty land tax are not chargeable on the exercise of resolution powers under the UK special resolution regime for managing failing financial institutions.
To help the process of resolving a failed financial institution, the Government will legislate to exempt particular transactions from stamp taxes. The exemption is in relation to the temporary transfer of shares or land to a bridge entity, and the transfer of shares in exchange for temporary certificates issued to creditors that identify their entitlement to the shares. This is intended to simplify and strengthen the process of resolving a failed financial institution and to help to ensure that the ‘no creditor worse off’ principle is upheld. The exemption will have effect on and after Royal Assent of Finance Bill 2018-19.
"This measure should relieve some of the transaction costs associated with rescuing financial institutions."
The Government has announced that it will not seek to reapply the stamp duty (SD) and stamp duty reserve tax (SDRT) 1.5% charge on the issue of shares, and transfers integral to capital raising, into overseas clearance services and depositary receipt issuers following the UK’s exit from the European Union.
Following a Court of Justice of the European Union (CJEU) judgement in 2009 and a subsequent First-tier Tribunal judgement in 2012, HMRC accepted that the UK’s 1.5% charge to SD and SDRT was incompatible with the Capital Duty Directive. Consequently, a 1.5% SD and SDRT charge could not be applied on the issue of shares (and transfers integral to capital raising) into overseas clearance services and depositary receipt issuers. This was further backed up by the recent case of Air Berlin V HMRC heard by the CJEU.
"This announcement is welcome to confirm that the status quo will continue even after the UK ceases to be bound by the Capital Duty Directive."