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Neil Warren comes up with an empty basket of VAT measures on Budget Day
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VAT: The silent budget

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Apart from some stray dental prosthetics and an interim margin scheme for cars imported to Northern Ireland from Great Britain, VAT expert Neil Warren came up empty handed in his sweep of the Budget paperwork.

27th Oct 2021
Independent VAT Consultant
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When the Chancellor devoted a chunk of his Budget speech to explaining how Alcohol Duty would be simplified now that the UK is no longer in the EU, my initial thought was, “We’re not going to get any juicy VAT changes today.”

And so it proved. I searched the HMRC Budget papers with as much intensity as a seagull looking for a bag of half-eaten chips on Brighton beach, but no joy. The main VAT announcement was that the importation of dental prostheses will be exempt from VAT, backdated to 1 January 2021. I won’t comment on this change – I’ll let the dental profession get their teeth into seeing what this means.

There will also be an interim arrangement with the VAT margin scheme for cars going from GB to Northern Ireland before it’s replaced with a new secondhand motor vehicle export refund scheme. But this change, like the dental announcement, is industry specific.

Hospitality supplies

There was good news for the hospitality industry with business rates reliefs – including gyms - but no extension of the 12.5% rate of VAT beyond 31 March 2022. This is reasonable because it was always intended to be a temporary rate, a transition between the temporary 5% rate we had until 30 September 2021 and the standard 20% rate that will return on 1 April 2022.

The main challenge will be for suppliers to decide whether to absorb the VAT increase next year and therefore reduce profits, or pass on the 7.5% increase to their customers with higher prices. This will be a commercial rather than tax decision.

However, as someone who likes simplicity, at least we will return in April to three VAT rates of 0%, 5% and 20%. That’s not a bad thing.

Thresholds unchanged

The annual VAT registration threshold will remain at £85,000 and the deregistration threshold at £83,000 for 2021/22. No surprise here because it was previously announced that the rates would be frozen at these levels until 2024 at the earliest.

I suspect that the thresholds will be suspended at these rates in perpetuity, gradually increasing the number of UK businesses that have to join the VAT club.

Conclusion

No simplifications… No increases or reductions in VAT rates for specific supplies… No abolition of the outdated flat rate scheme… No zero-rating of gas and electric bills for homes; the 5% rate still applies here.

The good news? I can watch the football tonight instead of spending time delving into lots of VAT Budget papers. Happy days!

Replies (2)

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RLI
By lionofludesch
27th Oct 2021 16:50

Who's playing ?

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By AndrewV12
28th Oct 2021 12:26

'The annual VAT registration threshold will remain at £85,000'

Pity that threshold is not creping up to £100,000

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