VAT Rate Increase

During the 2010 Budget the Chancellor announced an increase in the standard rate of VAT to 20% with effect from 4 January 2011. This allows adequate time for business, particularly retailers, to make any changes to pricing, point of sale and accounting systems to deal with the new rate. To combat any unreasonable attempts to reduce the burden of the increase HMRC have also announced anti forestalling legislation which will block any prepayment planning arrangement which does not meet normal commercial practices. Exempt, partly exempt and nonprofit making organisations who are unable to recover all of the VAT on their costs may still wish to review whether there are any short term commercially viable VAT savings to be made within these rules.

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ECJ rules on the rounding of VAT in Wetherspoons case

The ECJ has ruled that member states should decide on the rules and methods for rounding up amounts of VAT as long as they observe the principles underpinning the EU common system.

The decision follows a case involving HM Revenues and Customs (HMRC) and JD Wetherspoons, a UK pub chain. The company had argued that it was entitled to apply the method of rounding down when calculating VAT on sales while HMRC felt that VAT should be rounded arithmetically when the customer pays.

UK law states that a business may round down the total VAT payable on all goods and services shown on a VAT invoice to a whole penny and that fractions of a penny can be ignored.

However, as Wetherspoon only provides VAT invoices upon request, Wetherspoons argued that its method of aggregating these amounts and rounding them down the total to the nearest penny was a more efficient system.

Electronic VAT returns from 2010

HMRC has announced that it intends to withdraw paper VAT returns with effect from 1 April 2010.

This will apply to all businesses that register for VAT from this date, and existing VAT registered businesses that have an annual turnover exceeding £100,000 (exclusive of VAT). These businesses will have to complete their VAT returns online and make payments electronically.

Changes to the online VAT registration form

HMRC have updated the online version of the VAT 1 form (the application form for VAT registration) to match the paper version of the form. The ‘new’ paper version was put into circulation in late 2006, while HMRCs online system still used the ‘old’ format.
From 2010 all applications must be completed and submitted online. With both versions “in sync” the necessary change to online applications should be simpler

Change to the duty limit, but NOT the VAT limit

When goods are imported into the UK from outside the EC there will be no customs duty or import VAT due if the value is £18 or less. However, from 1 December 2008 the duty threshold increased to £105.
We can confirm that the VAT limit is still £18. This means there is an additional cost (VAT) when goods up to a value of £105 are imported.
Any excise duties (if applicable) remain unchanged in line with the import VAT threshold.