VAT registration threshold rises to £77,000

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Once again, VAT played a minor role in the Budget 2012 proceedings. The measures announced included:

  • Correction of certain anomalies in the VAT system that cause very similar products to be taxed very differently.
  • Increase in VAT registration limit to £77,000 from 1 April 2012
  • Annual adjustment to the VAT fuel scale rates, in line with current fuel prices, from 1 May 2012
  • Confirmation of a range of measure previously announced, to come into effect in 2012 and 2013.

The £4,000 increase in the registration threshold is in line with inflation, but as Rebecca Benneyworth explained, "The bigger the limit, the bigger the increase".

Measures to correct VAT anomalies and loopholes

The Treasury seems to have been accumulating a list of anomalies that it has now decided to remove. Some of these have been the subject of VAT appeals in the past which have left uncertainty as to the correct VAT treatment on borderline cases. In some cases the Treasury claims that a significant minority of traders have historically not charged VAT where they believe it should have been charged. These changes aim to remove all uncertainty.

From 1 October 2012, VAT will be extended to remove anomalies by charging VAT on:

  1. self storage (to align it with other forms of storage) and
  2. alterations to listed buildings (to align with the existing VAT treatment of repairs),

and to close loopholes in respect of:

  1. hairdressers’ chairs (to make clear that their rental is already subject to VAT),
  2. static holiday caravans (to bring in line with mobile caravans),
  3. certain hot take away food (because most hot food is already subject to VAT) and
  4. sports nutrition drinks (treating them the same as standard-rated soft drinks).

Anti-forestalling provisions will be introduced in Finance Bill 2012 with effect from 21 March 2012 to prevent suppliers from artificially bringing forward the tax point on supplies made after 30 September 2012.

Registration and deregistration thresholds – From 1 April 2012 the VAT registration threshold will be increased from £73,000 to £77,000 and the deregistration threshold from £71,000 to £75,000.

The simplified reporting requirement (three line accounts) in the self employment section of the Self Assessment tax return will continue to be aligned with the VAT registration threshold.

Other VAT changes announced were largely a reminder of changes previously announced over the last year or so.

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