Partner Article

VAT – another missed opportunity in this year’s Budget?

As expected, legislation will be introduced changing the VAT place of supply rules for the taxation of intra-EU business to consumer supplies of telecommunications, broadcasting and e-services.

Effective from 1 January 2015, these services will be taxed in the Member State in which the consumer is located. VAT legislation will also introduce a ‘Mini One Stop Shop’ enabling businesses accounting for VAT on these types of supplies the option of only registering in the UK, using a single return, rather than registering in each applicable Member State where their customers belong.

It’s surprising that HMRC has taken so long to address this particular VAT anomaly but, suppliers offering customers a prompt payment discounts will now be required to account for VAT on the full consideration paid for goods and services, not on the discounted price offered. This change will come into effect on 1 May 2014 for supplies of telecommunication and broadcasting services to consumers and from 1 April 2015 for all other goods and services.

While air ambulance and inshore rescue services will welcome the Chancellor relieving VAT on their fuel costs, extending eligibility for the VAT refund scheme to these service providers (as he will to Combined Authorities and the London Legacy Development Corporation) would have been more beneficial as an increased VAT recovery would make the limited budgets of these organisations go much further.

The Chancellor also announced an additional £140 million being made available, on top of that already provided, for immediate repairs and maintenance to damaged flood defences across Britain. However, a wider application of 5% reduced VAT rate to agricultural production, repair, renovation and maintenance of housing, hospitality, leisure and tourism sectors could have helped these affected areas more by stimulating demand for such services from local businesses, thereby increasing employment (and subsequent direct taxes).

It wouldn’t be a Budget without addressing at least some VAT anti-avoidance measures, and in this Budget it’s been announced that there will be several consultations issued in the coming months including: a ‘reverse charge’ on the wholesale supply of gas and electricity to prevent increasing missing trader intra-community fraud on such activities; and improvements to the VAT disclosure regulations by shifting the prima

This was posted in Bdaily's Members' News section by Baker Tilly .