Even though the Spring Statement was heavily overshadowed by Brexit and stayed true to predictions that it was a ‘fiscal non-event’, there were some general points that businesses need to be aware of regarding VAT.
1. Partial exemption and Capital Goods Scheme Simplification
The main announcement from a VAT perspective is the call for evidence to simplify and improve both the Partial exemption provisions and the Capital goods Scheme. The idea is to try to simplify the rules to make them easier for taxpayers to apply. This follows on from a recommendation by the Office of Tax Simplification.
HMRC confirmed a light touch approach in relation to penalties and Making Tax Digital in the first year of implementation, meaning that no filing or record keeping penalties will be issued. Organisations must however, be able to demonstrate that they have taken active steps to comply.
Taxpayers who are voluntarily registered for VAT (who are not currently mandated for MTD but can opt in should they choose) also fall within ‘no mandation in 2020’. This might however, change going forward as MTD is rolled out to other taxes.
3. VAT Simplification and the Public Sector
It was announced that there will be a policy paper exploring a potential reform to VAT refund rules for central government, with the aim of reducing administrative burdens and improving public sector productivity
4. VAT Administration in the Isle of Man
Off the back of the Paradise Papers (the grand exposé into money laundering), the Isle of Man Government invited HM Treasury to review its VAT administration processes for the importation of aircraft and yachts. This has led to HM Treasury giving out recommendations to ensure the right VAT continues to be paid and collected in the Isle of Man.
5. Tackling Tax Avoidance
HMRC and HM Treasury jointly produced a policy paper which sets out the list of measures that have been used to tackle tax avoidance, evasion and non-compliance since 2010, including many VAT examples. It also explains how they see MTD as supporting the government’s strategy to tackle the tax gap. You can view the policy paper here.
Overall, there were no surprises but if you’re unsure about any VAT or wider tax issues, please get in touch.