VAT Turnover Thresholds

The taxable turnover threshold at which a person must register for VAT will increase from £61,000 to £64,000.

A person who is registered for VAT will be eligible to apply for deregistration if the taxable turnover of their business is £62,000 or less. The previous limit was £59,000.

This change will have effect for registrations and deregistrations on or after 1 April 2007.

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VAT Fuel Scale Charges

Some businesses are able to recover VAT incurred on fuel used for private motoring. From 1 May 2007 the basis of the VAT charge on that fuel used will change from the size of the engine to the amount of carbon dioxide emissions, aligning the VAT treatment with the basis used in direct taxation. The VAT charge will continue to reflect expenditure on that fuel.

The new scales must be used from the start of the next VAT quarter beginning on or after 1 May 2007.

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VAT Changes following Recent ECJ Decisions

Recent judgments of the European Court of Justice have rendered ineffective legislation introduced in 2003 to in respect of assets used partly for non-business purposes.

Regulations will be introduced to determine how VAT charges on non-business use are to be calculated. This will shorten to 10 years the period over which VAT charges on non-business use of land and buildings are paid.

The new rules will make it clear that a surrender of an interest in land for no consideration will be treated in the same way as a grant of a new interest or a transfer of an existing interest.

The enabling legislation for these Regulations will be introduced in Finance Bill 2007. The measure will be subject to a consultation period during the summer.

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VAT Transfers of Going Concern

For transfers of going concern taking place on and after 1 September 2007, the seller will retain the VAT records except in the rare instances that the buyer takes on the seller’s VAT number. The seller will also be required to make available to the buyer the information it needs to comply with its VAT obligations.

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VAT Joint and Several Liability

VAT-registered businesses receiving from another VAT-registered business any goods listed in section 77A Value Added Tax Act 1994 may be held jointly and severally liable for VAT if they had reasonable grounds to suspect VAT would go unpaid elsewhere in the supply chain. These rules currently apply to telephones, computers and their parts and accessories. A Treasury Order made on 21 March 2007 adds to this list certain electronic goods.

The Finance Bill 2007 will allow the Treasury to extend or alter the circumstances in which a person is presumed to have reasonable ground to suspect VAT will go unpaid elsewhere in the supply chain.

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