Budget 2010 – VAT changes

As ever, the Budget didn’t appear too interesting in terms of VAT changes. Indeed I came across a headline indicating that there would be no changes to VAT.

Look a bit further though, and there were quite a few changes, although admittedly nothing to get anybody terribly worked up about.

  • VAT registration limit goes up to £70,000 from 1 April 2010 and the Fuel Scale Charge rates have been increased again, for VAT periods starting on or after 1 May 2010.
  • Zero rating will no longer be available for aircraft on the basis of weight. From 1 September 2010, aircraft (and spares/repairs) will only be zero rated where used by airlines “operating for reward chiefly on international routes”
  • ‘Place of supply’ of gas, heat and cooling will change from 1/1/2011. The detail is a bit tedious, but if you want to know all about it please ask.
  • Certain postal services provided by Royal Mail will become liable to VAT from 31/1/2011, chiefly in the realms of parcel deliveries. ‘Domestic mail’ remains unchanged.
  • From 1/11/2010, a reverse charge will be introduced to combat ‘Missing Trader’ fraud by certain miscreants buying or selling emissions allowances. If you’re doing it, you know who you are.
  • From 1/1/2011, the rules surrounding the use of the “Lennartz” procedure are changing, such that businesses hoping to utilise it (or who have already) will be adversely affected. In essence, the Lennartz treatment allows a business to reclaim VAT in full on an asset that has both business and private use, at the time of purchase. Then, as time progresses, any private use is subject to output VAT, as and when it takes place. HMRC have never liked it, but as it emanated from a European Court ruling, they have been obliged to allow it. They are now restricting it somewhat, and also making certain aspects of it retrospective. I just love the following phrase: “ The legislation will ensure that this position is treated as having always had effect.” A quick Google on the words “retrospective taxation” suggests that this might be in breach of Article 1 of Protocol No.1 to the ECHR. Further digging, however, suggests that this topic is well beyond the scope of this blog, and I don’t intend to get into legal argument on this point – I’ll leave this to those better equipped to consider the matter.

Like I said, nothing too dramatic, but if you require further information about any of the items, please let me know.


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