Neil Warren reviews the changes to VAT which are proposed for 2018/19 and later years.
Registration threshold frozen
Despite the excitement of the OTS VAT report published earlier this month, and the wholly unjustified speculation that the VAT registration threshold would be cut from £85,000 to £26,000 in the Budget, there was only a minor amendment to the usual inflationary increase in the threshold that takes place in April each year. The threshold will be frozen at the current figure of £85,000 until at least 1 April 2020.
In reality, the freezing of the threshold will capture more businesses to the VAT net – with inflation running at 3%, we would have usually expected an increase to £87,000 in April 2018, and possibly to £90,000 in April 2019. The government has also pledged to consult on the “design of the registration threshold.”
Reverse charge for construction industry
A major change for construction industry workers will take place in October 2019, with the introduction of a reverse charge system for VAT reporting. This means that the VAT charge will shift from the supplier to the customer. This will usually produce a ‘nil’ payable figure for the customer who will claim input tax and account for output tax for the same amount. However, the reverse charge is designed to prevent a supplier from charging 5% or 20% VAT and then failing to account for the output tax on a VAT return and pay it to HMRC.
Online VAT fraud
The government seems determined to tackle the avoidance of VAT by sellers that trade through an online marketplace. Measures to be introduced in 2018 will now apply to all online sales, and not just those relevant to overseas businesses, and will make the marketplace jointly and severally responsible for the VAT payment. There will also be a requirement for the marketplace to display the sellers’ VAT numbers and check that they are valid.
These tough measures are good news for bona fide UK traders who have suffered a competitive VAT disadvantage because of non-complaint online sellers.
About Neil Warren
Neil Warren is an independent VAT consultant and author who worked for Customs and Excise for 14 years until 1997.