9 March 1999 Budget

Value added tax

VAT thresholds

From 1 April 1999, the VAT registration threshold will increase from £50,000 to £51,000 and the deregistration threshold will rise from £48,000 to £49,000. The registration and deregistration thresholds for acquisitions from other EU countries will also be increased from £50,000 to £51, 000.

Partial exemption

The partial exemption simplification rule allowing certain VAT-exempt business activities to be ignored and all input tax to be reclaimed will be withdrawn with effect from 10 March 1999. There is no change to the de minimis rules that allow businesses that make small volumes of exempt supplies to recover all the VAT on their purchases. The withdrawing of this rule therefore has little effect on smaller businesses.

VAT avoidance

A further package of measures to tackle VAT avoidance schemes and close loopholes was announced. They include: misuse of the VAT grouping facility increase of VAT recovery on the construction of a non-residential building by a lease and lease-back to an associate, exploitation of the rules applying to construction services.

Measures will be introduced to counter avoidance through the misuse of the capital goods scheme, the timing of returns to exploit the repayment supplement provisions, the assignment of debts to third parties to reduce VAT and the claiming of too much bad debt relief.

Other VAT changes

• Changes to the VAT treatment of membership subscriptions to political, religious, patriotic, philosophical and philanthropic bodies will enable many such bodies to reclaim VAT on the costs of supplying publications to members.
• The penalty for giving an incorrect certificate claiming the VAT zero rate for a supply will be extended to incorrect certificates claiming the reduced rate.
• Penalty assessments for failure to submit an EU sales statement or for inaccuracies in EU sales statements will not be made more than two years after the facts come to the attention of Customs.
• From 10 March 1999, the scope of the VAT exemption relating to financial intermediary services, payment and credit transfer services and credit management services will be changed following recent cases. In particular all credit management and most processing services will become liable to standard rate VAT.