As always in a Budget, the Chancellor has increased the VAT registration and deregistration thresholds. However, this year they have both been increased by just £1,000. Again, unlike previous years, this increase applies with effect from 1 May 2009 not 1 April.

• VAT Registration threshold increases to £68,000
• VAT Deregistration threshold increases to £66,000

Following a major change to the Option to Tax rules in the middle of last year, another, albeit minor, change was announced in the budget. This is a revision of the conditions for "automatic permission" to Opt to Tax where land or a building was used to generate exempt income prior to the decision to Opt. Details of the change are yet to be published.
 

Children's car seats are subject to VAT at just 5%. This reduced rate will be extended, with effect from 1 July 2009, to the sale of base units for such seats.
 

For any VAT period beginning on or after 1 May 2009, new Fuel Scale Charges have been set. A full list of the new charges are available in HMRC's Budget Notice 69 on the HMRC website.

http://www.hmrc.gov.uk/budget2009/bn69.htm

Please remember that the VAT element of these charges is currently 3/23, rising to 7/47 when the VAT rate changes to 17.5% on 1 January 2010.
 

It was confirmed that the VAT rate will return to 17.5% on 1 January 2010, despite the initial legislation being effective only until 30 November 2009.

More details of the anti-forestalling measures designed to stop artificial pre-invoicing for supplies that will actually take place after 1 January 2010 have been released. These measures will charge an additional 2.5% VAT on any supplies made to a customer that cannot recover all of the VAT on its purchases where one of the following applies:

• the supplier and customer are connected parties; or
• the supplier funds the purchase of the goods or services (or grant of right); or
• a VAT invoice is issued by the supplier where payment is not due for at 2009 Budget Notes Page 170 of 222 least six months.

These provisions apply to any supply made after 25 November 2005.

An additional 2.5% VAT charge will also apply to any supply of goods or services where a pre-payment in excess of £100,000 is made before 1 January 2010 for a supply to be made after that date. This will not be applied where such a pre-payment is "is accordance with normal commercial practice". The measure applies from 1 March 2009.
 

With effect from 27 April 2009 participation fees for playing bingo or other games of chance will become exempt from VAT, a measure Bingo Halls have campaigned for for a long time. However, Bingo Duty has been increased to 22%.
 

The system for charging and paying interest on VAT under or overpaid is to be harmonised with other taxes. Due to the complexity of such a measure the changes will be phased in and, unfortunately, do not include a change from simple to compound interest for overpayments.
 

HMRC are to be required to prepare and maintain a Charter which sets out standards of behaviour and values to which HMRC will aspire. This must be in place by the end of 2009 and HMRC will be required to report annually on its performance.

From 1 January 2010 the rules governing where business to business services supplied across intra-EU borders are supplied, and therefore subject to VAT, will be changed. Changes will be implemented at the start of 2010, 2011 and 2013.

The aim of the changes, in most cases, is to make the place of supply to the country where the customer is and the VAT accountable by the customer under the reverse charge.

The new basic place of supply for business to business supplies will be where the customer is established. The basic rule for non-business customers will remain the place where the supplier is established.

There will be some exceptions to the general rule:

• Admissions to cultural, artistic, sporting, scientific, educational, entertainment events similar services to business customers will be taxed where the event takes place (from 1 January 2011);
• Land related services will take place where the land is situated (as now);
• Restaurant and catering services will be taxed where they are physically performed;
• Short-term hire of means of transport (30 days or 90 days for vessels) will be taxed where the vehicle is put at the disposal of the customer;
• Long-term hire to non-business customers will be taxed where the customer is established ( other than pleasure boats) ( from 1 January 2013);
• Passenger transport services, the use and enjoyment provisions and electronically supplied for non-business customers will remain unchanged.

From 1 January 2010 new rules will govern when the supplies detailed above are deemed to be supplied.

For single supplies of services the supply will be deemed to occur when the service is completed or when it is paid for if this is earlier.

For continuous supplies of services a supply will be deemed to occur at the end of each billing or payment period. For continuous services with no billing or payment period the supply will be deemed to occur at the earlier of payment or 31 December.
 

Again on 1 January 2010 supplies by UK businesses of services that are deemed to be supplies in another EU Member State and subject to the Reverse Charge there will need to be declared on a quarterly EC Sales List.
 

From 1 January 2010 claims for VAT incurred in other EU Member States will be made electronically to HMRC in the UK. The deadline for such claims is being extended from 6 months after the calendar year end to 9 months after the calendar year end. Member States will then be required to repay the VAT within 4 months unless further information is requested.

Overseas businesses incurring VAT in the UK will make claims through electronic systems in their Member State.
 

Barry Stocks
Director, VAT & Indirect Taxes
T: 0161 837 1876
E: barry.stocks@btg-tax.com

Mike Marsden
VAT Senior Manager
T: 0161 837 1880
E: mike.marsden@btg-tax.com

Tony Jackson
Director of VAT Services
T: 0121 452 1515
E: tony.jackson@btg-tax.com

Simone Hurst
Director of VAT Services
T: 0121 452 1515
E: simone.hurst@btg-tax.com

Paul Taylor
VAT Manager
T: 0121 452 1515
E: paul.taylor@btg-tax.com

Helen Benussi
Senior VAT Consultant
T: 0121 452 1515
E: helen.benussi@btg-tax.com

Jaysson Palmer
VAT Partner
T: 020 7024 8370
E: jaysson.palmer@btg-tax.com

Mark Chesham
Director of VAT Services & IPT
T: 0117 937 7138
E: mark.chesham@btg-tax.com