Value added tax (VAT)
Registration and deregistration
The VAT registration turnover limit rises to
£61,000 from 1 April 2006. The deregistration limit increases to
£59,000. The turnover limit for businesses to join the VAT annual
accounting scheme rises to £1,350,000 from the same date. The cash
accounting limit remains at £660,000 but may be increased to
£1,350,000 subject to approval by the European Commission.
Reduced rate for contraceptives
The rate of VAT on contraceptive products will be
reduced to 5%. The change is expected to take effect on 1 July 2006.
Contraceptives that are currently zero-rated or exempt will
remain so.
Missing trader intra-community VAT fraud –
‘carousel fraud’
A new provision will change the person who is liable
to account for and pay the VAT on the sale of mobile phones, computer chips and
some other electronic items. This new rule is subject to the agreement of the
European Commission.
HMRC’s power to enter premises and inspect goods
in connection with VAT will explicitly include the right to mark any goods
inspected. HMRC will also be able to require businesses to keep specified
records relating to certain goods that they have traded, for example IMEI
numbers for mobile phones. The measure is directed at goods that may be subject
to VAT fraud but not limited to them. These measures take effect from Royal
Assent.
Partial exemption
HMRC will ‘consult informally’ on two
proposed changes to the VAT partial exemption regime. One would require
businesses to declare whether a proposed special method is ‘fair and
reasonable’ before HMRC gives approval for its use. The change would
enable HMRC to recoup VAT that has been incorrectly claimed where the business
should have known that the method was not fair and reasonable. The other would
facilitate ‘combined methods’ that cater for the recovery of VAT
relating to overseas supplies.
VAT fuel scale charges
New scales apply from the start of the first
accounting period beginning after 30 April 2006.
| |
3
month period |
1
month period |
| Cylinder capacity |
Scale
charge diesel |
VAT due
per car |
Scale
charge petrol |
VAT due
per car |
Scale
charge diesel |
VAT due
per car |
Scale
charge petrol |
VAT due
per car |
| |
£ |
£ |
£ |
£ |
£ |
£ |
£ |
£ |
Up to 1,400cc
|
260
|
38.72 |
273 |
40.66 |
86
|
12.81 |
91 |
13.55 |
1,401-2,000cc
|
260
|
38.72 |
346 |
51.53 |
86
|
12.81 |
115 |
17.13 |
| Over 2,000cc |
331
|
49.30 |
508 |
75.66 |
110
|
16.38 |
169 |
25.17 |
The summary has been prepared very rapidly and
may contain errors for which we cannot be held responsible. The proposals are
in any event subject to amendment before the Finance Act is passed. Advice
should be taken before any action. |
