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VAT update following recent Budget changes

My thanks go to John Shearer of Mayell Shearer VAT Consultants for the following VAT Update newsletter.

Budget 2011
The VAT registration threshold will be £73,000 with effect from 1 April 2011. It was £5,000 when VAT was introduced to the UK!

The de-registration threshold becomes £71,000.

Fuel Scale charges are revalued with effect from the start of the next VAT accounting period beginning on or after 1 May 2011. The rates have been published. I note that HMRC has used the word ‘revalorised’; however, in my dictionary (albeit printed in circa 1966), revalorise means to restore or re-establish a value whereas revalue means to set a new value. They don’t teach English like what they used to!

With effect from Royal Assent, measures will be put in place to prevent the treating of printed matter as a separate zero-rated supply when supplied with other items at a different rate in situations where, if the supplies had been made by a single supplier, the overall supply would be treated as one. This is an anti-avoidance measure to prevent the artificial splitting of supplies to benefit from zero-rating of component items.

Hot take-away food
I have happy memories of caravan holidays spent in and around the Black Forest and one such memory is of German Schnell-Imbiβ outlets selling hot ‘Wurste’ or sausages. Anyway, it seems that from now on these treats will be even more attractive as in a recent ECJ ruling on four conjoined cases, referred to popularly in the name of one, ‘Manfred Bog’, it has been decided that such take-away food may be zero-rated. This principle is based on the fact that the ‘service’ element in such supplies is minimal compared with that in a restaurant, for example.

Naturally, many UK accountancy firms are encouraging clients to submit protective claims in the hope that someday the UK Tax Authority will come to the same conclusion. I would take this idea with a pinch of salt!

However, it is understood that in the UK there is a different structure with regard to hot take-aways and it will be no surprise to learn that HMRC has already stated that this case does not change its view.

If one does submit a protective claim, presumably in the hope that some large and well-financed body will take a test-case in the UK, then it is likely that one would have to pursue the likely rejection to appeal stage (on the back of the hoped-for test case).

We will be pleased to assist any clients who wish to make a protective claim on the basis of ‘nothing ventured, nothing gained’.

Education issues
From 1 April, Academy schools will be able to recover VAT on non-business activities (non-fee-paying education). This will put in place a ‘level playing field’ in relation to Local Authority schools.

Low Value Consignment Relief (LVCR)
Currently, one can import items not exceeding £18 without paying VAT. However, it has become apparent that this relief is being abused by some businesses. The Finance Bill will introduce a reduction in the threshold to £15 and there will be an on-going review of the relief to seek to prevent inappropriate application.

Inter-charity cost sharing
Consultation is in progress to address the VAT costs that can arise where charities or educational bodies seek to work together for purposes of efficiency. An exemption in certain circumstances may be the outcome of the review.

HMRC online services
You may wish to know that HMRC online services including CT/PAYE/self-assessment and VAT will be ‘offline’ from 2 April to the 6 April for IT upgrading work. Perhaps they are carrying out a spell check?

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