Changes made (or signalled) to thresholds, EU imports, vouchers and refunds.
Two-year threshold freeze
In response to the announcement of a VAT simplification by the Office of Tax Simplifcation (OTS) earlier this month, the chancellor has decided to freeze the VAT threshold from April 2018 and will maintain its current level of £85,000. However, he has also indicated that these thresholds are far greater than in the rest of the world, so businesses should expect a reduction in the threshold after April 2020.
Government will be looking at the options available for accounting for VAT when importing goods from the EU. This will be necessary for the benefit of UK businesses and economy after the Brexit negotiations conclude. At present, businesses postpone accounting for VAT when importing goods from the EU, which provides them with a significant cashflow advantage.
Article from ACCA In Practice
A consultation has been announced to bring vouchers into the VAT regime from 2018/19. Once this has been made law, businesses will be accounting for the same rate of VAT on payments made with vouchers. This would bring the UK into alignment with similar rules applicable across the rest of the EU.
The government will make the following changes to VAT refunds:
- Combined authorities
The Finance Bill 2017/18 will amend legislation to ensure that UK combined authorities and certain fire services in England and Wales will be eligible for VAT refunds.
- Accident rescue charities
A grant will be provided to help accident rescue charities meet the cost of normally irrecoverable VAT.
VAT receipts are expected to raise £145bn in 2018/19, the second largest source of income for the public sector. Once the thresholds have been reduced, VAT is expected to raise a further £1bn to £1.5bn a year.