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VALUE ADDED TAX From 1 April 1999 Current Standard rate 17.5% 17.5% VAT fraction 7/47 7/47 Registration - last 12 months or coming 30 days over £51,000 £50,000 Deregistration - coming year under £49,000 £48,000 Cash accounting scheme - up to £350,000 £350,000 The consultation on the VAT registration threshold has resulted in no change to the existing policy of inflationary increases each year. In a Statement that announced a 'far-reaching tax reform', mention was also made of the lower than expected indirect tax revenues. The Budget's main aims are to combat what is seen as leakage of VAT revenue due to avoidance schemes. The principal areas targeted are VAT grouping, financial services, land and property and the capital goods scheme. The ever-present threat of Mini General Anti Avoidance Rules was again raised. Customs will now have the power, with effect from Royal Assent, to remove companies from a VAT group whose presence could reduce the revenue take by the Exchequer. This could affect all exempt or partially exempt members of groups who save VAT when receiving services from other group members. Following several defeats before the Courts, Customs have tightened up the exemption available for financial services with effect from 10 March 1999. Many businesses that supply certain outsourced administrative services to banks and financial institutions will no longer be eligible for exemption. No indication was given of the revenue yield to be gained by this measure, but it is likely to significantly increase the VAT cost to the financial sector. To counter perceived misuse of the capital goods scheme, measures are to be brought in with immediate effect which will affect calculations under the scheme made by businesses with fluctuating partial exemption recovery percentages. A widely used simplification to the partial exemption rules for businesses outside the financial sector, permits them to ignore the potential restriction applied to input tax incurred in respect of incidental exempt activities. With effect from 10 March 1999 this simplification is removed. The effects will be felt by all businesses outside the financial sector involved in financial or property-related transactions. Following the extensive anti-avoidance measures introduced in March 1997 in relation to the option to tax on land and property, a further measure is introduced with effect from 10 March 1999, to counter the effect of delays in incurring the costs of a capital project. This will further complicate an already complex area of VAT.
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