Following the Chancellor’s last Spring Budget, Menzies VAT Advisory team have reviewed the impact of Philip Hammond’s announcement upon the UK SME community.
Comments provided by Menzies VAT Director Robert Facer.
VAT Update: Thresholds
The VAT registration threshold for UK established businesses will increase from £83,000 to £85,000 with effect from 1 April 2017.
The de-registration threshold will increase from £81,000 to £83,000 on the same date.
VAT Update: Change for Telecoms Providers
Businesses supplying mobile phone services to private individuals (i.e. B2C supplies) should be aware of an important change to the VAT rules announced in the 2017 Budget.
Currently, B2C mobile phone services supplied to a UK individual are subject to standard rate UK VAT, to the extent that the services are used in the EU. However, if the individual uses the services (i.e. makes calls etc) whilst outside the EU, no VAT is charged. This is because of a special rule known as ‘use and enjoyment’. HMRC have announced that the use and enjoyment rule is to be withdrawn, which will mean that services will be subject to UK VAT, regardless of where the services are used. Businesses supplying such services will need to update their billing systems to ensure that VAT is accounted for correctly. The effective date of the change is still to be confirmed.
Other VAT Update Matters
HMRC will consult on measures to tackle missing trader fraud in connection with the supply of labour in the construction sector. The introduction of a reverse charge rule is to be considered.
HMRC will shortly publish a ‘call for evidence’ concerning the possible introduction of a ‘split payment’ mechanism for collecting VAT on online sales, at the point of purchase.
Get more input on the 2017 Spring Budget implications for the SME community please contact our VAT Advisory team.