VAT and Indirect Taxes

VAT and Indirect Taxes – An Ultimate Guide



From 1 April 2013 2012
Standard rate 20% 20%
VAT fraction 1/6 1/6
Taxable turnover limits
Registration – last 12 months from 1 April or next 30 days over £79,000 £77,000
Deregistration – next year under £77,000 £75,000
Annual accounting scheme £1,350,000 £1,350,000
Cash accounting scheme £1,350,000 £1,350,000
Flat rate scheme £150,000 £150,000


Changes to registration and deregistration thresholds


From 1 April 2013, the taxable turnover threshold, which requires a person to register for VAT, will be increased from £77,000 to £79,000 per annum; the threshold below which a VAT-registered person may apply to deregister will be increased from £75,000 to £77,000 per annum, and the relevant registration and deregistration threshold for Intra-Community acquisitions will also be increased from £77,000 to £79,000 per annum.

The simplified reporting provision for the income tax self-assessment return (three line accounts) would continue to be consistent with the threshold for VAT enrolment.

The new simpler income tax cash basis intended to simplify the way in which small businesses can calculate their trade profits, will be available to them from the 2013/14 tax year and onward. The requirements for qualifying for the cash basis will be related to the VAT registration threshold set at the end of the tax year.

Changes to a place of supply rules


As part of the on-going, staggering changes to the place of supply rules for international services, the legislation will be introduced in Finance Bill 2014 to tax Intra-Community business to consumer (‘B2C’) supplies of telecommunications, broadcasting and e-services in the Member State in which the consumer is located.

Such services are currently subject to VAT in the Member State in which the undertaking is located. The changes will take effect as from 1 January 2015. The main rationale given for the changes is fairness.

The obvious concern with this change would have been the need for VAT registration in the other EU Member States.  However, this has been addressed, in that a Mini One Stop Shop (‘MOSS’) will also be introduced from 1 January 2015. It is an IT program that offers companies the option of registering in the UK alone and paying for any VAT owed in the other Member States with a single return. As it is an option, affected businesses will not have to use MOSS and may, if they prefer, register in the Member State of consumption.

Fuel scale charges


As usual, changes have been made to fuel scale charges and the new rates are applicable to VAT return periods starting on or after 1 May 2013.

The legislation will be introduced in Finance Bill 2013 to change the way the scale charges are set out and provide for their annual reevaluation. This legislation will actually bring two concessions into law, simplify the annual reevaluation process and take it out of the Budget. HM Treasury will be given powers to change the way the annual reevaluation is done. This means it will be able to change the definition of road fuel and the scope of the optional scheme. A similar power will be introduced enabling HM Treasury to change the definition of road fuel in the anti-avoidance section of the legislation, although this will not affect the way the legislation will operate.

Withdrawal of exemption for business supplies of research between eligible bodies


On 14 March 2013, a consultation ended on the removal of the VAT exemption for market research offered by one qualifying body to another. Subject to the responses, the Government intends to introduce secondary legislation and proceed with the withdrawal of the exemption on 1 August 2013, but will consider the possibility of transitional reliefs.

Review of the retail export scheme (tax-free shopping)


The Government has launched a consultation on ways to reform the Retail Export Scheme, which requires VAT refunds on goods bought in the UK by non-EU tourists who export such items in their personal luggage to a destination outside the EU.
The consultation will be launched sometime during the summer and the main objective is to make the scheme easier to understand and use. The Government also hopes that any changes will reduce the risk of error and improve compliance, at the same time as representing value for money for the taxpayer. When responses have been collated, the Government will consider all options, including the introduction of a digital scheme.

Changes to zero-rating of exports from the UK


The Government has announced a consultation affecting the zero-rating of certain supplies of goods for export outside the EU. At the moment, supplies of goods to businesses that are registered for VAT in the UK, but do not have a business establishment here, and which then arrange for export of the goods to a final destination outside the EU, are standard rated. These changes would make such sales zero-rated in line with EU law.

After the consultation period, a statutory instrument will be laid. This is planned for late summer or early autumn. A minor change will also be made to UK law on zero-rating of goods dispatched to other EU Member States (Intra-Community sales). This will change an outdated reference to excise law.

Treatment of refunds made by manufacturers


The Government has announced that new legislation will be introduced in Finance Bill 2014 enabling regulations allowing manufacturers to reduce their VAT payments where they make refunds directly to final customers, for example when goods are faulty or damaged products or the customer is dissatisfied. There will be a consultation period so that the Government can understand industry practices better, which will help with the design of the legislation.

Refunds for the Health Care Research Authority and Health Education England


Following changes proposed in the Care and Support Bill, the Government has announced that it will introduce legislation in Finance Bill 2014 to add the Health Research Authority and Health Education England to section 41 of the VAT Act 1994. This will ensure that these bodies can continue to claim VAT refunds.

Extension of the education exemption to ‘for-profit’ providers of higher education


In Budget 2012, the Government proposed a university-level consultation on and review of the VAT treatment of education. The goal was to expand the current exemption to all commercial organizations offering such education. Nonetheless, no suitable alternatives have yet been identified, and the Government is finding alternate ways to make future improvements to the further education exemption. More time will be given to addressing the key issues raised and there will be a further consultation period later in 2013.

Measures unchanged following consultation


Draft legislation, affecting the reduced rate for energy-saving materials in charitable buildings and refunds for NHS bodies, has previously been published for consultation but no material changes will be made to the final legislation to be introduced in Finance Bill 2013.



Fuel duty


The 1.89p per litre fuel duty increase due to take effect on 1 September 2013 will be cancelled.



Beer duty was due to an increase by three pence with effect from 18:00 on 20 March 2013. The changes below are intended to reduce beer duty by one penny. The Budget announced reductions in the duty on beer as follows:

  • Low strength beer will be reduced by six per cent
  • Medium strength beer by two per cent, and
  • High strength beer will be reduced by 0.75 per cent

Tobacco duty


Tobacco duty rates increased by two per cent over and above inflation (RPI) from 18:00 on 20 March 2013. This will add, for example, 26 pence to the price of 20 cigarettes and nine pence to the price of a pack of five small cigars.

Vehicle excise duty


Rates are to increase in line with inflation (based on RPI) with effect from 1 April 2013. The exceptions to this are noted below.

Vehicle excise duty for heavy goods vehicles


Vehicle Excise Duty has been frozen in 2013/14 on heavy goods vehicles (HGVs), buses, and related categories of vehicle that are linked to the lower HGV rate (minor rates) for 2013/14.

Gaming duty


Legislation on raising the gross gaming yield (GGY) bandings for gaming duty in line with inflation (RPI) will be included in the Finance Bill 2013. The updated GGY bandages will be used for accounting periods starting on or after April 1, 2013.

Carbon price floor and Northern Ireland


The Government is announcing final details about the carbon price floor (CPF) which will come into effect on 1 April 2013. The rates from 1 April 2015 will be equivalent to £18.08 per tonne of carbon dioxide. The indicative rates for 2016/17 and 2017/18 are equivalent to £21.20 and £24.62 per tCO2 respectively.

The measure also confirms that the CPF will not apply in Northern Ireland from 1 April 2013.

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