VAT and indirect taxes

VAT update

With effect from 1 April 2017 the VAT registration threshold will be increased from £83,000 to £85,000, affecting around 4,000 businesses.

Certain VAT rules are also being changed. The ‘use and enjoyment’ rules, taxing certain services where used, are to be removed for suppliers of mobile phone services to individuals. Under these rules UK residents pay VAT when using their phones inside the UK, but not when using them abroad. HMRC believes that some providers are taking advantage of these rules to reduce VAT payable, but it has not yet produced any further information.

HMRC is also looking at other issues. It will consult on tackling missing trader fraud on supplies of labour in the construction sector. In addition, using further measures against offshore traders selling tax-free into the UK via the internet, HMRC will investigate whether technology can be used to separate at the point of sale the value of the supply and the tax – the so-called ‘split payments’ model – so that the tax can be collected at that point.

IPT anti-forestalling

Draft anti-forestalling clauses have been published in advance of the insurance premium tax (IPT) increase to 12% from 1 June 2017. These were subject to industry consultation, particularly on the thorny issue of what constitutes ‘new risk’ under an existing policy. The point here is that a ‘new risk’ resulting in an additional premium on or after 1 June 2017 would be at 12%, even if the contract had commenced before.

Additional points
 
  • Insurance premium tax: the standard rate will increase to 12% from 1 June 2017. The existing anti-forestalling rules will be replaced by new rules from 8 March 2017. 
  • Minimum Excise Tax (MET): from 20 May 2017 the MET will be set at £268.63 per 1,000 cigarettes. 
  • Gaming duty: the Gross Gaming Yield (GGY) bandings will rise in line with inflation from 1 April 2017, based on RPI. 
  • Remote gaming duty: the definition of gaming payments and prizes and the tax treatment of freeplays will be amended by Finance Bill 2017. 
  • Soft drinks industry levy: the main rate will be 18p per litre and 24p per litre will be the higher rate. The levy takes effect from April 2018. 
  • Air passenger duty rates: from 1 April 2017, rates will increase in line with RPI. The same will apply from 1 April 2018, but the rates for 2019 and 2020 will be set at Autumn Budget 2017. 
  • Alcohol duty rates: from 13 March 2017, duty rates on beer, cider, wine, made-wine and spirits will increase in line with inflation. 
  • Tobacco duty rates: from 8 March 2017, the duty rates for all tobacco products will be increased by 2% above inflation (based on RPI). 
  • Vehicle excise duty (VED) uprating: the VED rates for cars, motorcycles and vans registered before 1 April 2017 will increase by RPI from 1 April 2017. 
  • Tobacco, Illicit Trade Protocol: to aid the prevention of the illicit manufacture of tobacco products, legislation will be introduced to control the use and ownership of tobacco manufacturing machinery in the UK. 
  • HGV vehicle excise duty (VED) and HGV levy: rates of VED will be frozen in 2017 and 2018, including all rates linked to the basic goods rate. Similarly, levy rates will be frozen from 1 April 2017. 
  • Aggregates levy: this will remain frozen for 2017 to 2018 at £2 per tonne. 
  • Alcohol duty rates and bands: the Government will consult with a view to introducing a new band for still cider just below 7.5% adv. to target white ciders, and a new duty band for still wine and made-wine between 5.5% and 8.5% abv. 
  • Stamp duty land tax: the Government intends to reduce the filing and payment window from 30 days to 14 days. This measure has been delayed until after April 2018.
  • Landfill tax: the definition of a taxable disposal will be amended to clarify the tax treatment of material disposed at landfill sites, and will provide greater certainty to operators. 
  • Landfill tax, extending the scope to illegal disposals: the Government will consult on extending the scope of landfill tax to material disposed at illegal waste sites. 
  • Fulfilment House Due Diligence Scheme: from 1 April 2018 the scheme will require all UK fulfilment houses to register with HMRC and comply with record-keeping and due diligence standards. 
  • Value of Landfill Communities Fund: the value of the fund for 2017 and 2018 will remain unchanged at £39.3 million. The cap for contributions by landfill operators will be increased to 5.3%.