HMRC recently announced proposed changes to be introduced in the Finance Bill 2018-19.

Changes to VAT Grouping Eligibility

The draft legislation proposes to allow non-corporate bodies, such as a partnership or an individual to join a VAT group.

Under the previous rules, in order to join a VAT group, an entity was required to be a corporate body established or with a fixed establishment in the UK. Following the changes, a non-corporate entity will be able to join a VAT group provided they have a business establishment within the UK and share common control.

HMRC has published a policy paper containing the VAT grouping eligibility criteria changes. These changes are due to take effect from Royal Assent.

New Late Filing and Late Payment Penalty System for VAT

The default surcharge regime for VAT is being replaced from 1 April 2020. The new penalty system will introduce separate penalties for late payment and late filing. This new system will be harmonised across Corporation Tax, Income Tax Self-Assessment and VAT.

For late payment penalties, the penalty will be based on the lateness of the payment:
• No penalty will apply if the tax due is paid within 15 days of the due date.
• A reduced penalty will apply to payments made between 16 and 30 days from the due date.
• If the tax is not paid after 30 days, two penalties will be due. The first on day 30, based on the payment activity in the month and the second, when the outstanding balance is paid in full.
The above penalties can be suspended if a Time to Pay can be agreed.

Late filing penalties will be based on a points system, where a business will earn a penalty point for failing to file a return on time. Once the business reaches the maximum amount of points, they will be liable to a financial penalty. The maximum points threshold will vary depending on whether the business submits annual, quarterly or monthly returns.

New Draft VAT Legislation on Treatment of Vouchers

Changes are being introduced to the VAT treatment of vouchers issued on or after 1 January 2019. The purpose of the legislation is to provide clear definitions between Single Purpose Vouchers (SPV) and more complex Multi-Purpose Vouchers (MPV), and to harmonise the treatment of vouchers across the EU.

From 1 January 2019 a voucher will be considered an SPV where the ‘place of supply’ of the ultimate goods or services is known at the time of issue, and where the voucher can only be used for goods or services at a single rate of VAT. VAT will be due at the appropriate rate on the sale of the SPV.

Any voucher that is not an SPV, will be considered an MPV. VAT on this category of vouchers will be due when the voucher is redeemed in exchange for the goods or services. Intermediaries distributing MPVs will not be making a supply for VAT purposes, and this may have an impact on their VAT recovery position.

Under the new legislation, postage stamps and tickets, including travel or admission to a venue or event are specifically excluded and will not be considered vouchers. These will be treated under the normal tax point rules.

If you would like to discuss any of these changes and how they may impact you and your business please contact our VAT team here.

This information should not be regarded as financial advice. This is based on our understanding in August 2018. Laws and tax rules may change in the future.