2008 Budget VAT Notices Part 1

VAT: INCREASED TURNOVER THRESHOLDS FOR REGISTRATION AND DEREGISTRATION

Who is likely to be affected?
1. Businesses whose taxable turnover is close to the current VAT thresholds for registration and deregistration.
General description of the measure
2. The measure increases the taxable turnover threshold which determines whether a person must be registered for VAT from £64,000 to £67,000.
3. The taxable turnover threshold which determines whether a person may apply for deregistration will be increased from £62,000 to £65,000. The existing conditions for determining entitlement or liability to deregistration remain unchanged.
4. The registration and deregistration threshold for relevant acquisitions from other European Union Member States will also be increased from £64,000 to £67,000.
Operative date
5. The new registration and deregistration thresholds will have effect on and after 1 April 2008.
Current law and proposed revisions
6. The increase in the taxable turnover threshold means that a person will have to apply for registration if:
• at the end of any month, the value of the taxable supplies made in the past 12 months or less has exceeded £67,000; or
• at any time there are reasonable grounds for believing that the value of the taxable supplies to be made in the next 30 days alone will exceed £67,000.
7. If at the end of any month, a person’s taxable turnover in the past 12 months or less exceeds £67,000 but HM Revenue & Customs is satisfied that it will not exceed £65,000 in the next 12 months, that person will not have to be registered.
8. Schedules 1 and 3 to the Value Added Tax Act 1994 will be amended by statutory instrument to give effect to these changes.


VAT: AMENDMENT TO THE EXEMPTION FOR FUND MANAGEMENT

Who is likely to be affected?
1. Fund managers and providers of fund administration services.
General description of the measure
2. This measure will extend the VAT exemption for fund management to cover UK-listed investment entities (including investment trust companies and venture capital trusts) and certain overseas funds.
Operative date
3. The measure will have effect for supplies of services made on or after 1 October 2008.
Current law and proposed revisions
4. Items 9 and 10, of Group 5 of Schedule 9 to the VAT Act 1994 exempt the management of authorised unit trusts, trust based schemes and open-ended investment companies.
5. This exemption will be amended by secondary legislation to be laid before Parliament around the beginning of June 2008.
6. The funds defined for the exemption will be amended as follows:
• trust-based schemes will be deleted;
• closed-ended investment entities, which invest in securities and whose shares are included in the UK Listing Authority main Official List, will be added; and
• funds established outside the UK, which are recognised overseas schemes under sections 264, 270 and 272 of the Financial Services & Markets Act 2000, will be added.
7. Draft legislation and guidance will be published on the HM Revenue & Customs website in April 2008.



INDIRECT TAX RETURNS: CORRECTION OF ERRORS

Who is likely to be affected?
1. Businesses registered for Value Added Tax (VAT), insurance premium tax (IPT), air passenger duty (APD), landfill tax (LFT), climate change levy (CCL) and aggregates levy (AGL).
General description of the measure
2. This measure will increase the limit below which errors on previous returns may be corrected on the return for the period in which the errors are discovered.
Operative date
3. This measure will have effect for accounting periods commencing on or after 1 July 2008.
Current law and proposed revisions
4. The error correction regulations for VAT, IPT, APD, LFT, CCL and AGL permit the inclusion of errors below £2,000 on the next return submitted. Errors exceeding £2,000 have to be separately notified to HM Revenue & Customs (HMRC).
5. Regulation 34(3) of the VAT Regulations 1995 (SI 1995/2518) permits the taxable person to correct their VAT account during the accounting period in which the error is discovered, provided the net errors discovered do not exceed £2,000.
6. Schedule 3 of the Air Passenger Duty Regulations 1994 (SI 1994/1738) reproduces the return form APD2. Box 7 of that form provides for entry on the return of underdeclarations from previous periods, provided they do not exceed £2000. Box 8 of that form provides for overdeclarations from previous periods, with no limit.
7. Regulation 13(3) of the Insurance Premium Tax Regulations 1994 (SI 1994/1774) provides that, where the registrable person discovers underdeclarations or overdeclarations in an accounting period, they may be entered on the return for that accounting period, provided they do not exceed £2,000.
8. Regulation 13(4) of the Landfill Tax Regulations 1996 (SI 1996/1527) provides that, where a taxable person discovers underdeclarations they may be entered on the return for the accounting period in which they were discovered, provided that they do not exceed £2,000.
9. Regulation 28(2),(3) and (4) of the Climate Change Levy (General) Regulations 2001 (SI 2001/838) provide that, where a registrable person discovers a return previously made is based on an under-calculation or an over-calculation, they must correct the error on the return for the accounting period in which it was discovered, provided that it does not exceed £2,000.
10. Regulation 29(2), (3) and (6) of the Aggregates Levy (General) Regulations 2002 (SI 2002/761) provide that, where a registrable person discovers a return previously made is based on an under-calculation or an over-calculation, they must correct the error on the return for the accounting period in which it was discovered, provided the total net amount does not exceed £2,000.
11. This measure increases the de minimis £2,000 limit to the greater of £10,000 or 1 per cent of turnover, subject to an upper limit of £50,000 for VAT, IPT, LFT, CCL and AGL. For VAT, LFT, CCL and AGL errors above £10,000, the limit for correcting errors on the next return will be calculated by reference to net VAT turnover (Box 6 on VAT return) for the return period. For IPT, this limit will be calculated by reference to the net IPT turnover (Box 10 on IPT return). APD procedures will be amended to increase the de minimis limit to the greater of £10,000 or 1 per cent of duty due, before adjustments for errors from previous periods, subject to an upper limit of £50,000. For LFT, CCL and AGL taxpayers who are not required to be registered for VAT a single limit of £10,000 will have effect.
12. These regulations will be amended by statutory instrument to effect the changes to the voluntary disclosure limit.



VAT: CHANGES IN FUEL SCALE CHARGES

Who is likely to be affected?
1. Businesses which recover input tax on fuel used for private motoring.
General description of the measure
2. This measure will amend the VAT scale charges for taxing private use of road fuel, to reflect changes in fuel prices. It will also amend the table of CO2 bands to maintain alignment with those used for direct tax purposes.
Operative date
3. The scale charges will be amended by secondary legislation which will come into force on 1 May 2008. Businesses must use the new scale charges from the start of their next prescribed accounting period beginning on or after 1 May 2008.
Current law and proposed revisions
4. The scale charges are set out in Table A in Section 57(3) of the Value Added Tax Act 1994. Secondary legislation will be laid before Parliament in March to replace the current table with a new table to reflect the changes to the scale charges.

The scale charge for a particular vehicle is determined by its CO2 emissions figure. Where the CO2 emissions figure of a vehicle is not a multiple of five, the figure is rounded down to the next multiple of five to determine the level of charge. For a bi-fuel vehicle which has two CO2 emissions figures, the lower of the two figures should be used. For cars which are too old to have a CO2 emissions figure HM Revenue & Customs (HMRC) have prescribed a level of emissions by reference to the vehicle’s engine capacity (cc).
An update to Notice 700/64 VAT: Motoring Expenses, including the revised figures for all categories of vehicle, will be available from the National Advice Service in due course.