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Autumn Budget 2018 – Impact on VAT

VAT: no change in registration and deregistration thresholds
The VAT registration and deregistration thresholds will remain unchanged for 2019/20.

Therefore legislation will continue as follows:

– the taxable turnover threshold that determines whether a person must be registered for VAT will remain at £85,000;
– the taxable turnover threshold that determines whether a person may apply for deregistration will remain at £83,000;
– the registration and deregistration threshold for relevant acquisitions from other EU Member States will also remain at £85,000.

VAT: treatment of vouchers from 1 January 2019
The government will implement an EU Directive on the VAT treatment of vouchers in time for the required date of 1 January 2019. This will simplify the rules for the tax treatment of vouchers, especially where they can be used either in the UK or more widely in the EU. This will prevent either non-taxation or double taxation of goods or services which relate to vouchers.

The legislation provides for the VAT treatment of vouchers issued on or after 1 January 2019. It affects only vouchers for which a payment has been made and which will be used to buy something. It does not apply to vouchers issued before 1 January 2019, for which existing rules will continue to apply.

Vouchers, in this context, are gift cards and gift tokens, with examples including simple book tokens, gift vouchers, and electronic vouchers purchased from specialist businesses. The changes do not apply to discount vouchers or money-off tokens.

Under current UK VAT legislation, the customer is deemed to be receiving two supplies, namely a voucher; and an underlying supply of goods or services. The new rules determine that for VAT purposes there will no longer be a separate supply of a voucher. Instead the rules will be simplified so that there is only the supply of the underlying goods or services, which will be provided in exchange for the voucher at a later date.

Changes to the VAT specified supplies anti-avoidance
Article 3 of the Value Added Tax (Input Tax) (Specified Supplies) Order 1999 is to be amended to restrict its application in certain circumstances in order to prevent avoidance. The specified supplies order allows companies who export certain financial services from the European Union to reclaim the VAT they incur while providing those services. When these services are supplied inside the EU, this VAT cannot be reclaimed.

The Government believes that specified supplies order is currently being exploited by companies that form arrangements with organisations outside of the EU to re-supply or ‘loop’ those services back to United Kingdom consumers, allowing themselves to reclaim the VAT and thereby gaining a competitive advantage over purely UK based companies.

This order seeks to prevent a particular form of this ‘looping’ involving insurance intermediaries by restricting the application of the specified supplies order to cases where the final consumer is not in the UK, as was intended.

The expected implementation date for this change is 1 March 2019.

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