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The standard rate remains 17.5%.
From 1 April 2004, the annual registration limit is £58,000 (previously £56,000) and the deregistration limit is £56,000 (previously £54,000). From the same date the registration and deregistration limits for acquisitions from other EU countries are increased to £58,000 (previously £56,000).
Customs and Excise will publish a list of specific avoidance schemes and any business with supplies in excess of £600,000 using a scheme on the list must disclose its use to Customs and Excise within 30 days of the due date of the first return affected by the scheme. Failure to disclose will incur a penalty of 15% of the tax avoided.
Businesses with annual turnover in excess of £10 million must disclose the use of schemes that have the `hallmarks of avoidance'. Disclosure must be made within 30 days of the due date of the first return affected by the scheme. Failure to disclose the use of such a scheme will incur a penalty of £5,000. Additionally, those who devise and market such schemes can voluntarily register VAT avoidance schemes with Customs and Excise. Businesses using a `registered' scheme will not have to disclose its use.
The measures will come into effect soon after Royal Assent.
From 1 August 2004, two additional tests will be introduced before companies (including limited partnerships) are eligible to form or join a VAT group. The aim is to stop companies forming a VAT group to avoid having to charge VAT where one company makes supplies to another company that cannot fully recover the VAT charged. First, VAT grouping will only be allowed where the majority of the economic benefits from a business activity do not accrue to a third party. Secondly, the accounts of the company applying for VAT grouping must, under UK GAAP, be consolidated in the group accounts for the company controlling the VAT group. Both tests will need to be satisfied before VAT grouping is allowed.
From 18 March 2004, measures will be introduced to block two structures designed to reduce the VAT on the occupancy cost for partly exempt occupiers of commercial buildings. The measures will amend the `transfer of a going concern' rules and the option to tax provisions to stop either excessive VAT being recovered or the VAT cost being spread over a number of years.
Motor dealers and manufacturers can recover the input VAT incurred on the purchase of stock-in-trade cars used as demonstrator cars. However, such businesses must account for output VAT on any private use by employees. By charging employees a nominal amount (e.g. £1), VAT is only accounted for on that amount. This measure will allow Customs and Excise to direct that output VAT is accounted for on the `open market value' of the supply. The measure requires a derogation from EU VAT legislation and will come into effect by an Appointed Day Order after Royal Assent.
Customs and Excise have issued a Consultation Document on the disapplication of the option to tax where buildings are intended for use solely for a relevant residential or relevant charitable purpose. The consultation period ends on 30 June 2004.
From 1 January 2005, VAT on wholesale supplies of natural gas and electricity will be accounted for in the place where the customer receiving the supply is established.
Changes will also be introduced from that date which provide for:
VAT to be accounted for by a VAT registered customer where the supplier is in a different country;
natural gas and electricity to be relieved from VAT when imported from outside the EU;
changes in the place of supply relating to the provision of access to and use of distribution systems.
From 1 June 2004, the 5% reduced VAT rate will be extended to cover the installation of ground source heat pumps in all forms of residential accommodation.
From 1 April 2004, VAT registered businesses with an annual turnover not expected to exceed £660,000 (previously £600,000) are eligible to join the scheme. Businesses that are already using the scheme may continue to do so until their turnover reaches £825,000.
From 1 April 2004, businesses with an annual taxable turnover not exceeding £660,000 (previously £600,000) will be eligible to join the scheme. Businesses which are already using the scheme may continue to do so until their turnover reaches £825,000. Measures will also be introduced from 1 April 2004 giving businesses leaving the scheme the option to bring outstanding VAT to account on a cash basis for six months after leaving the scheme.
Revised fuel scale charges will be introduced for VAT accounting periods beginning on or after 1 May 2004.