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George Osborne's 2016 Budget, in relation to VAT, was heavily targeted on tackling VAT evasion and avoidance.

In particular, he homed in on overseas traders selling goods online to the UK as he seeks to protect UK businesses from unfair competition.

With HMRC expecting to receive VAT receipts in 2016/17 of £138 billion, just short of 20% of the UK's total tax receipts of £716 billion, the emphasis is on maximising collection.

Tackling VAT evasion by overseas traders
The Government is taking action to protect the UK market from unfair online competition. The measures will include:

  • HMRC will receive strengthened powers to ensure non-compliant overseas traders appoint a VAT representative in the UK, together with greater flexibility for seeking security;
  • HMRC to be able to inform online marketplaces (for example, Amazon, E-Bay etc.) of the traders who have not complied. If traders continue to evade VAT and no action is taken to prevent the fraud, then HMRC will have powers to hold online marketplaces jointly and severally liable for the unpaid VAT of an overseas business selling goods in the UK on that online marketplace's website;
  • Proposed introduction of a Fulfilment House due diligence scheme where overseas traders store their goods in the UK. This measure is intended to make it more difficult for VAT evading firms to trade and include 'fit and proper' standards for Fulfilment Houses to meet in order to operate. Here, Fulfilment Houses will have an obligation to register and maintain accurate records once online registration opens in 2018. Additionally, Fulfilment Houses will also have to provide evidence of the due diligence undertaken to ensure their overseas clients are following the VAT rules. There is to be a consultation on this scheme which will be used to minimise, as far as possible, any costs for legitimate businesses; and
  • The Government is to continue to raise VAT evasion with its EU and international partners, in particular, the EU and OECD's current work programmes include further work to help explore international solutions in combatting this VAT fraud. This is to include consideration of alternative mechanisms for the collection of VAT.

Other tax avoidance
The Government is to consider the case for clarifying what constitutes reasonable care in avoidance penalty cases as well as options to address the issue of those who enable tax avoidance schemes. The Government shall consult during the summer of 2016 on updating the VAT Disclosure of Schemes Regime, including the extension to the coverage to other indirect taxes and alignment with the Disclosure of Tax Avoidance Schemes regime.

Consultation on penalty for participating in VAT fraud
In spring 2016, the Government is to consult on the introduction of a new penalty for parties participating in VAT fraud, with the intention to legislate for this in Finance Bill 2017.

VAT refund scheme
The Government is to broaden the eligibility criteria for the VAT refund scheme for museums and galleries. New guidance was issued today to allow a wider range of free museums across the UK to access the VAT relief.

Reverse charge on 'airtime' services
As we already covered in our February VAT update, with effect from 1 February 2016, an anti-fraud measure was introduced to prevent Missing Trader Intra-Community fraud on wholesale supplies of electronic communications services.

VAT refunds for shared services
As announced in the Government's Autumn Statement 2014, it will legislate to enable named non-departmental and similar bodies to claim a refund of the VAT they incur as part of a shared service arrangement used to support their non-business activities. This measure is to encourage public bodies to share back-office services, where this results in efficiencies of scale.

Isle of Man charities
The Government is to legislate to ensure charities, subject to the jurisdiction of the High Court of the Isle of Man, are capable of qualifying for UK VAT charity reliefs.

Changes to registration and deregistration thresholds
The VAT registration and deregistration thresholds for UK businesses have been increased in line with inflation.
From 1 April 2016, the VAT registration threshold will increase by £1,000 to £83,000. It is believed that the increase to the VAT registration threshold will save around 2,000 small businesses from having to register for VAT by the end of the 2016-17 financial year. Further, the VAT deregistration threshold will also increase by £1,000 to £81,000. The VAT registration threshold for non-established businesses remains at £nil.

Contact us

Should you wish further information on the above, please do not hesitate to contact Gary using the details outlined below.


Gary Moore
Direct line 0141 636 9353
Mobile 07812 061 582
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