Mike Tombs's Blog

This blog provides information about tax, accounting and other issues affecting small owner-managed businesses in the UK. It is intended as a general source of information but you should not assume that everything applies to your specific circumstances. We are always happy to discuss providing tailor-made solutions to suit your individul needs. Visit www.tlaservices.co.uk to sign up for our free monthly Tax Tips and News newsletter.

Category Archives: VAT

MTD VAT regulations to be available by April 2018

The government has confirmed plans to publish and consult on draft VAT regulations for Making Tax Digital (MTD), with the aim to have the regulations in place by April 2018 to give businesses and software developers at least twelve months to prepare.

In July 2017 the Government announced that MTD is being delayed. MTD will be not be mandatory until April 2019, and then only for VAT. From that date, businesses with a turnover above the VAT threshold (currently £85,000) will be required to keep digital records for VAT purposes.

The VAT regulations will specify the information a business needs to maintain in digital format and will include:

  • The business name, principle place of business and VAT registration number, along with information about VAT accounting schemes used;
  • the VAT account that each VAT registered business must keep, by law – this is the link between primary records and the VAT return; and
  • information about supplies made and received.

Those reporting under the VAT flat rate scheme will not have to report under MTD except for purchases relating to capital goods with a VAT inclusive value of £2,000 or more.

Impact on businesses

Quarterly reporting for VAT is already mandatory for most businesses. Although 99% of VAT returns are filed online, only around 12% are currently filed via software. The majority of returns are therefore (presumably) manually entered onto the government gateway page and submitted to HMRC- requiring manual input and intervention. Under MTD, businesses will not be able to keep manual records.

Currently, spreadsheets are commonly used – not only to maintain records, but also to convert the information from accounting software into the VAT return figures. MTD requires spreadsheets to interact directly with software. Overcoming these issues may be challenging for businesses.

MTD applies for VAT return periods commencing on or after 1 April 2019. This is the same time that the UK will leave the EU. VAT is likely to be significantly impacted by Brexit, particularly in relation to the VAT treatment of transactions between the UK and EU.

Preparation

By April 2019, businesses will need to:

  • understand the tax-technical changes to the UK/EU VAT rules; and
  • ensure that their accounting systems and processes can deal with such changes correctly.

These changes will need to be implemented via the new reporting requirements of MTD. Businesses and their advisers are in for a busy time in 2019 – Early planning and preparation will be the key to a successful transition.

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September 2017 Q&A

Q. I have two small businesses which are treated as a group for VAT purposes, so we only submit a single VAT return covering both entities. Are we eligible to use the Flat Rate Scheme?

A. Unfortunately not. If you are part of a VAT group, or are eligible to join an existing VAT group, then you cannot use the Flat Rate Scheme (FRS).

There is also a rule which stops ‘associated’ businesses joining the FRS.

A business is ‘associated’ with another business if:

  • one business is under the dominant influence of another;
  • two businesses are closely bound by financial, economic and organisational links; or
  • another company has the right to give directions;
  • in practice, a company habitually complies with the directions of another. The test here is a test of the commercial reality rather than of the legal form.

If a business has been associated in this way with another in the last two years, but is not associated at the time an application to use the FRS is made, HMRC may allow the FRS to be used, if they agree in writing, that the former association is not a risk to the revenue.

Q. I am a sole trader and I run my business from home. I am using the cash basis for preparing my accounts for tax. Can I claim expenses for running my business from home?

A. Under HMRC’s ‘simplified expenses’ regime, if you work more than 25 hours a month from home, you should be able to claim flat rate expenses based on the number of hours you work. Current rates are as follows:

  • between 25 and 50 hours worked per month: £10 per month
  • between 51 and 60 hours worked per month: £18 per month
  • 101 hours or more: £26 per month.

If you claim the flat rate, you don’t have to work out the proportion of personal and business use for your home, e.g. how much of your utility bills are for business.

Q. I work for a sandwich delivery company and I use the company’s electric van to do my round each day. I take the van home with me at night and I am allowed to use it in the evenings and at weekends if I so wish. What is the currently tax position for electric vans?

A. The tax charge on zero-emissions vans is currently going through a period of change. From 2015/16 to 2017/18 inclusive, a rate of 20% of the van benefit charge for vans which emit CO2 applies to zero-emission vans. The taxable charge for conventionally-fuelled vans is £3,230 for 2017/18.

This means that if you are liable to the van benefit charge, for 2017/18:

  • if you are a basic rate taxpayer, you will pay tax of £129.20 (£3,230 x 20% x 20%); and
  • if you are a higher rate taxpayer, you will pay tax of £258.40 (£3,230 x 20% x 40%).

The charge will rise to 40% of the van benefit charge for conventionally-fuelled vans in 2018/19; it will be 60% in 2019/20, 80% in 2020/21 and 90% in 2021/22. From 2022/23, the van benefit charge for zero emission vans is 100% of the van benefit charge for conventionally fuelled vans.

VAT: zero-rating of adapted motor vehicles

Finance Act 2017 introduced legislation designed to end perceived abuse of the VAT relief on substantially and permanently adapted motor vehicles for disabled wheelchair users.

The amended rules, which took effect from 1 April 2017, now specify a limit on the number of vehicles within a specified period of time that an individual can purchase under this relief.

An eligible individual will be able to purchase one vehicle every three years. There are some instances when this limit can be exceeded, so if an individual’s car is written off or stolen or if the vehicle has ceased to be suitable for the disabled person’s use because of changes in the person’s condition.

In addition to the new limitations above, there is now a mandatory requirement for eligibility declaration forms to be submitted to HMRC. This form clarifies exactly what information an individual needs to provide to support their claim to a zero rated supply.

Motor dealers are also required to send information regarding these zero-rated sales to HMRC.

Individuals in breach of these new requirements may be denied the benefit of the zero rate, or may be subject to a penalty (under VATA 1994, s 62) if the declaration they make is incorrect.

August 2017 Q & A

Q. My wife has a part time job but doesn’t earn enough to pay tax. Can she get tax relief on contributions made to a pension scheme?

A. Yes, even if you are not earning enough to pay income tax, you still qualify to have tax relief added to any contributions you make to a pension plan. However, the maximum you can pay in is £2,880 a year, or 100% of your earnings, subject to the ‘annual allowance’ restrictions.

Tax relief is added to the contributions at the basic rate of tax (currently 20%), so if you pay in £2,880 net, tax relief of £720 will be added, meaning that the gross contribution into the pension will be £3,600 (£2,880 x 100/80).

Q. I am a qualified doctor and pathologist. I have recently registered for VAT as my turnover has exceeded the current VAT registration limits. In addition to my regular doctor’s practice, which I understand is still exempt for VAT, I also write medical reports for insurance companies. I understand that this service is standard rated. However, I have also recently been requested to carry out post mortems. I am statutorily obliged to carry out this work, but I am paid for it. Should I charge VAT on my invoices for this service?

A. As you state, some services will be taxable or exempt, depending on their primary purpose. This is particularly the case in the area of medical reports and certificates, and in these cases, it is necessary to establish their principal purpose, before liability can be determined. Where the service is principally aimed at the protection, maintenance or restoration of health of the person concerned, the supply is exempt. However, where a medical report is done solely to provide a third party with a necessary element for taking a decision for insurance or legal purposes, the supply is taxable at the standard rate.

Where a doctor is compelled by statute to perform a statutory service and charges a fee for it then the supply is outside the scope of VAT (see VAT Notice 701/57, para 4.13). Under Section 19 of the Coroners Act 1998 a coroner can appoint a doctor (pathologist) to carry out a post mortem if necessary. As this is a statutory requirement and the doctor must provide the service, any payment received will be outside the scope.

Q. I started my own business as a sole trader on 1 December 2016. Although it has been quite a slow start, my profits are slowly going up and I am hopeful that they will continue to rise steadily over the next few years. Should I use 30 November or the tax year-end as my accounting year-end?

A. As a general rule of thumb, choosing a year-end earlier in the year, will generally give a business longer to pay its annual tax bill. This, in turn, can help considerably with the business cash-flow.

Taxpayers are generally required to make two equal payments of their income tax liabilities including any Class 2 and Class 4 NIC liability) on account:

  • by 31 January in the tax year; and
  • by 31 July following the tax year,

based on the total income tax payable directly in the previous tax year.

The balance, together with any capital gains tax, is normally payable (or repayable) by 31 January after the tax year.

VAT Flat rate scheme: changes take effect

The VAT flat rate scheme (FRS) is used by many small businesses to help simplify their VAT reporting obligations. Businesses could often gain a cash advantage from using the scheme, but this advantage has been significantly curtailed from 1 April 2017, particularly in relation to service-related businesses. Whilst the FRS continues to operate, many businesses will no longer find it economical to use.

Broadly, the FRS is a simplified VAT accounting scheme for small businesses, which allows users to calculate VAT using a flat rate percentage by reference to their particular trade sector. When using the FRS, the business ignores VAT incurred on purchases when reporting VAT payable, with the exception of capital items which cost £2,000 or more. If the business incurs few expenses, and it operates in a sector with a relatively low FRS percentage, it will pay out less VAT to HMRC under the FRS than it would outside the scheme. Historically, many businesses have registered for VAT voluntarily before their turnover reached the VAT registration threshold, so they could make use of the cash advantage offered under the FRS.

Common percentages used by service-related businesses in recent years include:

  • Accountancy and legal services 14.5%
  • Computer or IT consultancy 14.5%
  • Estate agents and property management 12%
  • Management consultancy 14%
  • Business services not listed elsewhere 12%

However, from 1 April 2017 a new 16.5% FRS rate applies for businesses with limited costs (see below). Since the rate of 16.5% of gross turnover equates to 19.8% of the net, the result is that there will be almost no credit for VAT incurred on purchases. Many businesses, particularly in the trade sectors listed above, are likely to see a significant rise is VAT payments.

A ‘limited cost’ business is defined as one whose VAT inclusive expenditure on goods is either:

  • less than 2% of their VAT inclusive turnover in a prescribed accounting period;
  • greater than 2% of their VAT inclusive turnover but less than £1,000 per annum if the prescribed accounting period is one year (if it is not one year, the figure is the relevant proportion of £1,000).

Goods, for the purposes of this measure, must be used exclusively for the purpose of the business but exclude the following items:

  • capital expenditure goods;
  • food or drink for consumption by the flat rate business or its employees;
  • vehicles, vehicle parts and fuel (except where the business is one that carries out transport services – for example a taxi business – and uses its own or a leased vehicle to carry out those services).

(These exclusions are part of the test to prevent traders buying either low value everyday items or one off purchases in order to inflate their costs beyond 2%.)

Practical Tip

Businesses who are trading under the VAT threshold (£85,000 from 1 April 2017) may consider deregistering from VAT. Businesses who are trading over that threshold may wish to withdraw from the FRS.

February 2017 Q&A

Q. Due to unforeseen circumstances I have recently had to sell my house and down-size to a smaller property. I sold the house for £20,000 less than I paid for it. Can I offset this loss against income from my business and reduce my income tax liability for this year?

A. Unfortunately the tax law does not permit you to do this. I am assuming that you are not trading in properties and the house was either your main residence or an investment asset. Losses on the sale of a principal private residence are generally not allowable losses for tax purposes. If the property was an investment asset, the loss on the sale may be treated as a ‘capital loss’, which could be offset against other capital gains you make, but it cannot be offset against other income. For further information on this, see the HMRC Capital Gains Manual at paragraph CG65080.

Q. I have some spare cash earning virtually no interest in the bank and I have decided that I would like to buy a flat for my daughter, who is currently just 16. Am I correct in thinking that she cannot own the property until she is 18? Is there an alternative for ownership? What are the tax implications surrounding this proposal?

A. You could consider using a bare trust for buying the flat. In very broad terms, a bare trust is a basic trust in which the beneficiary (in this case, your daughter) has the absolute right to the capital and assets within the trust, as well as the income generated from the assets. This type of trust is popular with parents and grandparents who wish to transfer assets to children or grandchildren. The assets are held in the name of a trustee (in this case, you), who will be responsible for managing the trust in a prudent manner so as to generate maximum benefit for the beneficiaries. However, you would not have control over the assets and no say or discretion in directing the trust’s income or capital. However, since you will have provided the funds to buy the flat, under what is known as the ‘settlements legislation’ you will be taxed on the income from it until your daughter becomes 18.

When your daughter turns 18, you can change the name of ownership on the Land Registry documents, which is relatively straight-forward.

Q. I have been trading for several years. I am not currently registered for VAT but think my income is getting close to the VAT registration threshold. What items can I exclude from my ‘taxable turnover’ calculation?

A. When the ‘taxable turnover’ of a business reaches the VAT registration threshold, currently £83,000 per annum, it must register for VAT. As you state, any income you receive that is not counted as ‘taxable turnover’ is excluded from the £83,000 turnover figure.

There are several items that can be ignored when calculating ‘taxable turnover’ for VAT registration purposes. Any income that is ‘exempt’ from VAT is ignored. This commonly includes insurance, postage stamps or services; and health services provided by doctors or dentists.

Some goods and services are outside the VAT tax system so VAT is neither charged nor reclaimed on them. Such items include:

  • goods or services you buy and use outside of the EU;
  • statutory fees – like the London congestion charge;
  • goods you sell as part of a hobby – like stamps from a collection;
  • donations to a charity – if given without receiving anything in return.

Supplies of services to business customers in another EU member state or any customer outside the EU are treated as outside the scope of UK VAT and do not count towards turnover for VAT registration purposes (for example: supplying consultancy services to a business customer in Spain).

Other non-business income that may be excluded includes disbursements incurred on behalf of a client, grants, or any income from employment.

Finally, it is worth noting that you can ignore any ‘one-off’ sales of capital assets. This means that if, for example, you sell a van and the income received puts the business turnover over the registration limit, the sales proceeds can be ignored.

HMRC clarify pre-registration of VAT policy

HMRC have recently published Brief 16 (2016), entitled Treatment of VAT incurred on assets that are used by the business prior to VAT registration. Broadly, the brief aims to clarify when, and to what extent, VAT is deductible and what to do if the correct treatment has not been applied.

A business registering for VAT may recover tax incurred on goods and services before their effective date of registration(EDR). This allows the recovery of VAT against goods and services as long as they are used by the taxable person to make taxable supplies once registered.

Services must have been received less than six months before the EDR for VAT to be deductible. This time limit is a simplification of the rules and means that detailed calculations of the use before and after EDR are not required. This excludes services that have been supplied onwards. VAT on services received within the relevant time limit can be recovered in full.

Goods have a four-year time limit for deduction that is consistent with the general VAT ‘capping’ provisions. Again, this excludes goods that have been supplied onwards or consumed before EDR. However, VAT on fixed assets purchased within four years can be recovered in full.

HMRC believe that the word ‘consumed’ has been interpreted inconsistently over time, particularly in relation to business assets and HMRC. The purpose of Brief 16 is therefore to clarify the policy position, which HMRC stress, has not changed. The policy is as follows:

Subject to the normal rules on VAT deduction:

  • VAT on services received within six months of EDR and used in the business at EDR is recoverable in full;
  • VAT on stock is deductible to the extent that the goods are still on hand at EDR (for example apportionment may be required);
  • VAT on fixed assets purchased within four years of EDR is recoverable in full, providing the assets are still in use by the business at EDR.

Full recovery only applies if the business is fully-taxable. Businesses who are partly-exempt, have non-business activities, or need to restrict VAT deduction for any other reason, will need to take that into account when calculating deductible VAT.

HMRC will accept corrections for overpayment of VAT in the following circumstances:

  • the business has reduced the VAT it deducted on fixed assets, to account for pre-EDR use;
  • HMRC have raised an assessment of tax to account for pre-EDR use of fixed assets;
  • HMRC have reduced a repayment claim to account for pre-EDR use of fixed assets.

HMRC will consider claims for repayment of penalties and interest charged as a result of assessments.

The Autumn Statement 2016

This is aimed at those who didn’t receive our client newsletter – that is still available at http://eepurl.com/cqcb0b. If you do read them both, let me know which version you prefer:-)

Summary

Chancellor Philip Hammond has delivered his Autumn Statement 2016, which is the first major review of government finances since the EU Referendum, and Mr Hammond’s first major statement since taking responsibility for the work of the Treasury in July 2016. As previously speculated, this will be Mr Hammond’s only Autumn Statement as it was confirmed that the government is to move to a single major fiscal event each year. This means that following the Spring 2017 Budget and Finance Bill, Budgets will be delivered in the Autumn, with the first one scheduled to take place in Autumn 2017. However, the Office for Budget Responsibility (OBR) is required by law to produce two forecasts a year – one of these will remain at the time of the Budget, the other will fall in the Spring and the government will therefore respond to it with a new ‘Spring Statement’. This change means that we can expect a Finance Bill in Spring/Summer 2017 following the 2017 Budget. The effect of this new approach is that Finance Bills will be introduced following the annual Budget in Autumn, with the desired aim of reaching Royal Assent in the following Spring, before the start of the new tax year. This change in timetable is designed to help Parliament to scrutinise tax changes before the start of the tax year where most will take effect.

In addition to the Budget timetable changes, it has also been confirmed that, from next year, HMRC will publish customer service performance data more regularly and in greater detail. This will include the monthly publication of digital, telephony and postal performance data, as well as new customer complaints data.

Regarding tax, highlights from this Autumn Statement include:

  • confirmation of the government’s commitment to raising the personal allowance to £12,500 and the higher rate threshold to £50,000 by the end of the Parliament. From that point the personal allowance will rise in line with the Consumer Prices Index (CPI);
  • affirmed commitment to the ‘business tax road map’, which sets out plans for major business taxes to 2020 and beyond, including cutting the rate of corporation tax to 17% by 2020, the lowest in the G20, and reducing the burden of business rates by £6.7 billion over the next 5 years;
  • fuel duty will be frozen from April 2017 for the seventh successive year. This will save the average driver around £130 a year, compared to pre-2010 fuel duty escalator plans;
  • certain changes will be implemented to promote fairness in the tax system, including:
    • to tackle tax avoidance, the government will strengthen sanctions and deterrents and will take further action on disguised remuneration tax avoidance schemes;
    • to ensure multinational companies pay their fair share, following consultation, the government will go ahead with reforms to restrict the amount of profit that can be offset by historical losses or high interest charges;
    • Insurance Premium Tax will rise from 10% to 12% in June 2017; and
    • to promote fairness and broaden the tax base, the government will phase out the tax advantages of salary sacrifice arrangements.

This newsletter provides a summary of the key tax points from the 2016 Autumn Statement based on the documents released on 23 November 2016. The overview of legislation in draft, providing further information on all tax changes and updates on all tax consultations, will be published on 5 December 2016. Draft Finance Bill clauses, explanatory notes, tax information and impact notes, and responses to consultations will also be published on this date. We will keep you informed of any significant developments.

Individuals

Personal allowance and basic rate limit for 2017-18

The personal allowance for 2017-18 will be increased to £11,500 (£11,000 in 2016-17), and the basic rate limit will be increased to £33,500 (£32,000 in 2016-17). The additional rate threshold will remain at £150,000 in 2017-18. It was announced that the allowance will rise to £12,500 by the end of Parliament.

The marriage allowance will rise from £1,100 in 2016-17 to £1,150 in 2017-18.

Blind person’s allowance will rise from £2,290 in 2016-17 to £2,320 in 2017-18.

Starting rate for savings

The band of savings income that is subject to the 0% starting rate will remain at its current level of £5,000 for 2017-18.

Dates for ‘making good’ on benefits-in-kind

As announced at Budget 2016 and following a period of consultation, Finance Bill 2017 will include provisions to ensure an employee who wants to ‘make good’, on a non-payrolled benefit in kind will have to make the payment to their employer by 6 July in the following tax year. ‘Making good’ is where the employee makes a payment in return for the benefit-in-kind they receive. This reduces its taxable value. This will have effect from April 2017.

Assets made available without transfer of ownership

Existing legislation is to be clarified to ensure that employees will only be taxed on business assets for the period that the asset is made available for their private use. This will take effect from 6 April 2017.

Termination payments

As announced at Budget 2016, from April 2018 termination payments over £30,000, which are subject to income tax, will also be subject to employer NICs. Following a technical consultation, tax will only be applied to the equivalent of an employee’s basic pay if their notice is not worked, making it simpler to apply the new rules. The government will monitor this change and address any further manipulation. The first £30,000 of a termination payment will remain exempt from income tax and National Insurance.

Company car tax bands and rates for 2020-21

To provide stronger incentives for the purchase of ultra-low emissions vehicles (ULEVs), new, lower bands will be introduced for the lowest emitting cars. The appropriate percentage for cars emitting greater than 90g CO2/km will rise by 1 percentage point.

Cars, vans and fuel benefit charges

The company car fuel benefit charge multiplier will be £22,600 for 2017-18 (rising from £22,200 in 2016-17).

The van fuel benefit charge will rise from £598 to £610 for 2017-18.

The van benefit charge will rise from £3,170 to £3,230 for 2017-18.

Life insurance policies

Finance Bill 2017 will contain provisions regarding the disproportionate tax charges that arise in certain circumstances from life insurance policy part-surrenders and part-assignments. This will allow applications to be made to HMRC to have the charge recalculated on a ‘just and reasonable’ basis. The changes will take effect from 6 April 2017 and are designed to lead to fairer outcomes for policyholders.

NS&I Investment Bond

From Spring 2017, National Savings and Investments (NS&I), the government-backed investment organisation, will offer a new three-year Investment Bond with an indicative rate of 2.2%. The bond will offer the flexibility for investors to save between £100 and £3,000 and will be available to those aged 16 or over.

Personal Portfolio Bonds

As announced at Budget 2016 and following a period of consultation, the government will legislate in Finance Bill 2017 to take a power to amend by regulations the list of assets that life insurance policyholders can invest in without triggering tax anti-avoidance rules. The changes will take effect on Royal Assent of Finance Bill 2017.

ISA, Junior ISA and Child Trust Fund investment limits

The annual subscription limit for Junior ISAs and Child Trust Funds are to rise in line with the Consumer Prices Index (CPI) to £4,128 from 6 April 2017.

As previously announced, the ISA subscription limit will also rise from 6 April 2017, from £15,240 to £20,000.

National Living Wage and National Minimum Wage increases

From April 2017, the National Living Wage (NLW) for those aged 25 and over will increase from £7.20 per hour to £7.50 per hour. The National Minimum Wage (NMW) will also increase from April 2017 as follows:

  • for 21 to 24 year olds – from £6.95 per hour to £7.05;
  • for 18 to 20 year olds – from £5.55 per hour to £5.60;
  • for 16 to 17 year olds – from £4.00 per hour to £4.05;
  • for apprentices – from £3.40 per hour to £3.50.

The government announced that £4.3 million is to be spent on helping small businesses to understand the rules, and cracking down on employers who are breaking the law by not paying the minimum wage.

Consultation on reducing money purchase annual allowance

The pension flexibilities introduced in April 2015 gave savers the ability to access their pension savings flexibly, as best suits their needs. Once a person has accessed pension savings flexibly, if they wish to make any further contributions to a defined contribution pension, tax-relieved contributions are restricted to a special money purchase annual allowance (MPAA).

As announced in the Autumn Statement, a consultation has been launched relating to government proposals to reduce the MPAA to £4,000, with effect from April 2017. The consultation will run until 15 February 2017.

Foreign pensions

The tax treatment of foreign pensions is to be more closely aligned with the UK’s domestic pension tax regime by bringing foreign pensions and lump sums fully into tax for UK residents, to the same extent as domestic ones. The government will also close specialist pension schemes for those employed abroad (‘section 615′ schemes) to new saving, extend from five to ten years the taxing rights over recently emigrated non-UK residents’ foreign lump sum payments from funds that have had UK tax relief, align the tax treatment of funds transferred between registered pension schemes, and update the eligibility criteria for foreign schemes to qualify as overseas pensions schemes for tax purposes.

Cracking down on tax avoiders and those who help them

A new penalty is to be introduced for those helping someone else to use a tax avoidance scheme. Significant penalties may be imposed where HMRC successfully defeat avoidance schemes. The new penalty will ensure that those who help tax avoiders participate in avoidance schemes also face the consequences. In addition, tax avoiders will not be able to claim as a defence against penalties that relying on non-independent tax advice is taking reasonable care.

The taxation of different forms of remuneration

Employers can choose to remunerate their employees in a range of different ways in addition to a cash salary. The tax system currently treats these different forms of remuneration inconsistently and sometimes more generously. The government will therefore consider how the system could be made fairer between workers carrying out the same work under different arrangements and will look specifically at how the taxation of benefits in kind and expenses could be made fairer and more coherent. Proposed changes in this area are as follows:

  • Salary sacrifice – following consultation, the tax and employer National Insurance advantages of salary sacrifice schemes will be removed from April 2017, except for arrangements relating to pensions (including advice), childcare, Cycle to Work and ultra-low emission cars. This will mean that employees swapping salary for benefits will pay the same tax as the vast majority of individuals who buy them out of their post-tax income. Arrangements in place before April 2017 will be protected until April 2018, and arrangements for cars, accommodation and school fees will be protected until April 2021;
  • Valuation of benefits in kind – the government is currently reviewing how benefits in kind are valued for tax purposes – a consultation on employer-provided living accommodation, and a call for evidence on the valuation of all other benefits in kind, will be published at Budget 2017;
  • Employee business expenses – at Budget 2017, the government will publish a call for evidence on the use of the income tax relief for employees’ business expenses, including those that are not reimbursed by their employer.

Legal support

From April 2017, all employees called to give evidence in court will no longer need to pay tax on legal support from their employer. This will help support all employees and ensure fairness in the tax system, as currently only those requiring legal support because of allegations against them can use the tax relief.

Non-domiciled individuals

As previously announced, from April 2017, non-domiciled individuals will be deemed UK-domiciled for tax purposes if they have been UK resident for 15 of the past 20 years, or if they were born in the UK with a UK domicile of origin. Non-domiciled individuals who have a non-UK resident trust set up before they become deemed-domiciled in the UK will not be taxed on income and gains arising outside the UK and retained in the trust.

From April 2017, inheritance tax will be charged on UK residential property when it is held indirectly by a non-domiciled individual through an offshore structure, such as a company or a trust. This closes a loophole that has been used by non-domiciled individuals to avoid paying inheritance tax on their UK residential property.

The government will change the rules for the Business Investment Relief (BIR) scheme from April 2017 to make it easier for non-domiciled individuals who are taxed on the remittance basis to bring offshore money into the UK for the purpose of investing in UK businesses. The government will continue to consider further improvements to the rules for the scheme to attract more capital investment in British businesses by non-domiciled individuals.

Inheritance tax reliefs

From Royal Assent of Finance Bill 2017, inheritance tax relief for donations to political parties will be extended to parties with representatives in the devolved legislatures, as well as parties that have acquired representatives through by-elections. This measure is designed to ensure consistent and fair treatment for all national political parties with elected representatives.

Social Investment Tax Relief (SITR)

From 6 April 2017, the amount of investment social enterprises aged up to 7 years old can raise through SITR will increase to £1.5 million. Other changes will be made to ensure that the scheme is well targeted. Certain activities, including asset leasing and on-lending, will be excluded. Investment in nursing homes and residential care homes will be excluded initially, however the government intends to introduce an accreditation system to allow such investment to qualify for SITR in the future. The limit on full-time equivalent employees will be reduced to 250. The government will undertake a review of SITR within two years of its enlargement.

Offshore funds

UK taxpayers invested in offshore reporting funds pay tax on their share of a fund’s reportable income, and capital gains tax (CGT) on any gain on disposal of their shares or units. The government will legislate to ensure that performance fees incurred by such funds, and which are calculated by reference to any increase in the fund’s value, are not deductible against reportable income from April 2017 and instead reduce any tax payable on disposal of gains. This equalises the tax treatment between onshore and offshore funds.

Reduction in Universal Credit taper

Under the Universal Credit system, as a person’s income increases, their benefit payments are gradually reduced. The taper rate calculates the reduction in benefits as a person’s salary increases. Currently, for every £1 earned after tax above an income threshold, a person receiving Universal Credit has their benefit award reduced by 65p and keeps 35p. From April 2017, the taper will be lowered to 63p in the pound, so the claimant will keep 37p for every £1 earned over the income threshold.

National Insurance Contributions

As recommended by the Office of Tax Simplification (OTS), the Class 1 secondary (employer) NIC threshold and the primary (employee) threshold will be aligned from April 2017, meaning that both employees and employers will start paying NICs on weekly earnings above £157.

As announced at Budget 2016, Class 2 NICs will be abolished from April 2018, simplifying National Insurance for the self-employed. The Autumn Statement confirmed that, following the abolition of Class 2 NICs, self-employed contributory benefit entitlement will be accessed through Class 3 and Class 4 NICs. All self-employed women will continue to be able to access the standard rate of Maternity Allowance. Self-employed people with profits below the Small Profits Limit will be able to access Contributory Employment and Support Allowance through Class 3 NICs. There will be provision to support self-employed individuals with low profits during the transition.

For 2017-18, Class 2 NICs will be payable at the weekly rate of £2.85 (rising from £2.80) above the small profits threshold of £6,025 per year (rising from £5,965 in 2016-17).

Class 3 voluntary contributions will rise from £14.10 to £14.25 per week for 2017-18.

For 2017-18, the lower profits limit for Class 4 NICs will be £8,164 and the upper profits limit will be £45,000. Contributions remain at 9% between the two thresholds and at 2% above the upper profits limit.

Businesses

Simplifying PSAs

As announced at Budget 2016 and following a period of consultation, Finance Bill 2017 will include provisions to simplify the process for applying for and agreeing the Pay as You Earn Settlement Agreement (PSA) process. Broadly, a PSA allows an employer to make one annual payment to cover all the tax and National Insurance due on small or irregular taxable expenses or benefits for employees. Further details will be published in due course. The changes will have effect in relation to agreements for the 2018-2019 tax year and subsequent tax years.

Capital allowances: first-year allowance for electric charge-points

From 23 November 2016, businesses will be able to claim a 100% first-year allowance (FYA) in relation to qualifying expenditure incurred on the acquisition of new and unused electric charge-points. The allowance will be available until 31 March 2019 for corporation tax purposes and 5 April 2019 for income tax purposes.

The measure complements the 100% FYA for cars with low carbon dioxide (CO2) emissions, and the 100% FYA for cars powered by natural gas, biogas and hydrogen.

Employee shareholder status

The income tax reliefs and capital gains tax exemption will no longer be available with effect from 1 December 2016 on any shares acquired in consideration of an employee shareholder agreement entered into on or after that date. Any individual who has received independent advice regarding entering into an employee shareholder agreement before the 23 November 2016 will have the opportunity to do so before 1 December (but not later) and still receive the income and CGT tax advantages that were known to be available at the time the individual received the advice. The effective date is to be the 2 December where independent legal advice is received on 23 November prior to 1.30pm. Corporation tax reliefs for the employer company are not affected by this change.

New tax allowance for property and trading income

As announced at Budget 2016, the government will create two new income tax allowances of £1,000 each, for trading and property income. Individuals with trading income or property income below the level of the allowance will no longer need to declare or pay tax on that income. The trading income allowance will now also apply to certain miscellaneous income from providing assets or services.

Expanding the museums and galleries tax relief

The new museums and galleries tax relief is to be expanded to include permanent exhibitions. The new relief, which starts in April 2017, was originally only intended to be available for temporary and touring exhibitions. The rates of relief will be set at 20% for non-touring exhibitions and 25% for touring exhibitions. The relief will be capped at £500,000 of qualifying expenditure per exhibition. The relief will expire in April 2022 if not renewed. In 2020, the government will review the tax relief and set out plans beyond 2022.

Tax deductibility of corporate interest expense

Following recent consultation, the government will introduce rules that limit the tax deductions that large groups can claim for their UK interest expenses from April 2017. These rules will limit deductions where a group has net interest expenses of more than £2 million, net interest expenses exceed 30% of UK taxable earnings and the group’s net interest to earnings ratio in the UK exceeds that of the worldwide group. The provisions proposed to protect investment in public benefit infrastructure are also to be widened. Banking and insurance groups will be subject to the rules in the same way as groups in other industry sectors.

Reform of loss relief

Following consultation, the government will legislate for reforms announced at Budget 2016 that will restrict the amount of profit that can be offset by carried-forward losses to 50% from April 2017, while allowing greater flexibility over the types of profit that can be relieved by losses incurred after that date. The restriction will be subject to a £5 million allowance for each standalone company or group.

In implementing the reforms the government will take steps to address unintended consequences and simplify the administration of the new rules. The amount of profit that banks can offset with losses incurred prior to April 2015 will continue to be restricted to 25% in recognition of the exceptional nature and scale of losses in the sector.

Bringing non-resident companies’ UK income into the corporation tax regime

The government is considering bringing all non-resident companies receiving taxable income from the UK into the corporation tax regime. At Budget 2017, the government will consult on the case and options for implementing this change. The government wants to deliver equal tax treatment to ensure that all companies are subject to the rules which apply generally for the purposes of corporation tax, including the limitation of corporate interest expense deductibility and loss relief rules.

Substantial Shareholding Exemption (SSE) reform

Following consultation, the government will make changes to simplify the rules, remove the investing requirement within the SSE and provide a more comprehensive exemption for companies owned by qualifying institutional investors. The changes will take effect from April 2017.

Authorised investment funds: dividend distributions to corporate investors

The rules on the taxation of dividend distributions to corporate investors are to be modernised in a way which allows exempt investors, such as pension funds, to obtain credit for tax paid by authorised investment funds. Proposals and draft legislation will be published in early 2017.

Northern Ireland corporation tax

The government will amend the Northern Ireland corporation tax regime in Finance Bill 2017 to give all small and medium sized enterprises (SMEs) trading in Northern Ireland the potential to benefit. Other amendments will minimise the risk of abuse and ensure the regime is prepared for commencement if the Northern Ireland Executive demonstrates its finances are on a sustainable footing.

Corporation tax deduction for contributions to grassroots sport

As announced at Autumn Statement 2015 and following consultation, in Finance Bill 2017 the government will expand the circumstances in which companies can get corporation tax deductions for contributions to grassroots sports from 1 April 2017.

Patent Box rules

The government will legislate in Finance Bill 2017 to add specific provisions to the Patent Box rules, covering the case where Research and Development (R&D) is undertaken collaboratively by two or more companies under a ‘cost sharing arrangement’. The provisions ensure that such companies are neither penalised nor able to gain an advantage under these rules by organising their R&D in this way. This will have effect for accounting periods commencing on or after 1 April 2017.

Authorised contractual schemes: reducing tax complexity for investors in co-ownership authorised contractual schemes

As announced at Budget 2016 and following a period of consultation, Finance Bill 2017 will include legislation (to be supported by secondary legislation) to clarify the rules on capital allowances, chargeable gains and investments by co-ownership authorised contractual schemes (CoACS) in offshore funds, as well as information requirements on the operators of CoACS.

Off-payroll working rules

Following consultation, the government will reform the off-payroll working rules in the public sector from April 2017 by moving responsibility for operating them, and paying the correct tax, to the body paying the worker’s company. This reform aims to tackle high levels of non-compliance with the current rules and means that those working in a similar way to employees in the public sector will pay the same taxes as employees. In response to feedback during the consultation, the 5% tax-free allowance will be removed for those working in the public sector, reflecting the fact that workers no longer bear the administrative burden of deciding whether the rules apply.

Bank levy reform

As announced at Summer Budget 2015, the bank levy charge will be restricted to UK balance sheet liabilities from 1 January 2021. Following consultation, the government confirms that there will be an exemption for certain UK liabilities relating to the funding of non-UK companies and an exemption for UK liabilities relating to the funding of non-UK branches. Details will be set out in the government’s response to the consultation, with the intention of legislating in Finance Bill 2017-18. The government will continue to consider the balance between revenue and competitiveness with regard to bank taxation, taking into account the implications of the UK leaving the EU.

Hybrids and other mismatches

The government will legislate in Finance Bill 2017 to make minor changes to ensure that the hybrid and other mismatches legislation works as intended. The changes will have effect from 1 January 2017.

Annual Tax on Enveloped Dwellings

The annual charges for the Annual Tax on Enveloped Dwellings (ATED) will rise in line with inflation for the 2017-2018 chargeable period.

Clarification of tax treatment for partnerships

Following consultation, the government will legislate to clarify and improve certain aspects of partnership taxation to ensure profit allocations to partners are fairly calculated for tax purposes. Draft legislation will be published shortly for technical consultation.

Tax-advantaged venture capital schemes

The rules for the tax-advantaged venture capital schemes (Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS) and Venture Capital Trusts (VCTs)) are being amended to:

  • clarify the EIS and SEIS rules for share conversion rights, for shares issued on or after 5 December 2016;
  • provide additional flexibility for follow-on investments made by VCTs in companies with certain group structures to align with EIS provisions, for investments made on or after 6 April 2017; and
  • introduce a power to enable VCT regulations to be made in relation to certain shares for share exchanges to provide greater certainty to VCTs.

In addition, a consultation will be carried out into options to streamline and prioritise the advance assurance service.

The government will not be introducing flexibility for replacement capital within the tax-advantaged venture capital schemes at this time, and will review this over the longer term.

Gift Aid digital

As announced at Budget 2016, intermediaries are to be given a greater role in administering Gift Aid, with the aim of simplifying the Gift Aid process for donors making digital donations.

VAT

Tackling aggressive abuse of the VAT Flat Rate Scheme

A new 16.5% VAT flat rate for businesses with limited costs will take effect from 1 April 2017.

The VAT Flat Rate Scheme (FRS) is a simplified accounting scheme for small businesses. Currently businesses determine which flat rate percentage to use by reference to their trade sector. From 1 April 2017, FRS businesses must also determine whether they meet the definition of a limited cost trader, which will be included in new legislation.

Businesses using the scheme, or thinking of joining the scheme, will need to decide whether they are a limited cost trader. For some businesses – for example, those who purchase no goods, or who make significant purchases of goods – this will be obvious. Other businesses will need to complete a simple test, using information they already hold, to work out whether they should use the new 16.5% rate.

Businesses using the FRS will be expected to ensure that, for each accounting period, they use the appropriate flat rate percentage.

A limited cost trader will be defined as one whose VAT inclusive expenditure on goods is either:

  • less than 2% of their VAT inclusive turnover in a prescribed accounting period;
  • greater than 2% of their VAT inclusive turnover but less than £1000 per annum if the prescribed accounting period is one year (if it is not one year, the figure is the relevant proportion of £1000).

Goods, for the purposes of this measure, must be used exclusively for the purpose of the business but exclude the following items:

  • capital expenditure;
  • food or drink for consumption by the flat rate business or its employees;
  • vehicles, vehicle parts and fuel (except where the business is one that carries out transport services – for example a taxi business – and uses its own or a leased vehicle to carry out those services).

These exclusions are part of the test to prevent traders buying either low value everyday items or one off purchases in order to inflate their costs beyond 2%.

Updating the VAT Avoidance Disclosure Regime

As announced at Budget 2016 and following consultation, legislation will be introduced in Finance Bill 2017 to strengthen the regime for disclosure of avoidance of indirect tax. Provision will be made to make scheme promoters primarily responsible for disclosing schemes to HMRC and the scope of the regime will be extended to include all indirect taxes. This will have effect from 1 September 2017.

Penalty for participating in VAT fraud

As announced at Budget 2016, Finance Bill 2017 will introduce a new and more effective penalty for participating in VAT fraud. It will be applied to businesses and company officers when they knew or should have known that their transactions were connected with VAT fraud. The penalty will improve the application of penalties to those facilitating orchestrated VAT fraud. The new penalty will be a fixed rate penalty of 30% for participants in VAT fraud. This will be implemented following Royal Assent of the Finance Bill 2017.

Power to examine and take account of goods at any place

The government will introduce legislation in Finance Bill 2017 to extend the current customs and excise powers of inspection. This will amend the Customs and Excise Management Act 1979 and enable officers to examine goods away from approved premises such as airports and ports, to search goods liable for forfeiture and open or unpack any container. This will take effect from Royal Assent of the Finance Bill 2017.

Retail Export Scheme

The government is to consult on VAT grouping and provide funding with a view to digitising fully the Retail Export Scheme to reduce the administrative burden to travellers.

Tackling exploitation of the VAT relief on adapted cars for wheelchair users

The government is to clarify the application of the VAT zero-rating for adapted motor vehicles to stop the abuse of this legislation, while continuing to provide help for disabled wheelchair users.

Indirect taxes

Landfill tax

As announced at Budget 2016, the definition of a taxable disposal for landfill tax purposes is to be amended in order to bring greater clarity and certainty. This will come into effect after Royal Assent of Finance Bill 2017, on a day to be appointed by Treasury Order

.

Insurance Premium Tax increase

Insurance Premium Tax (IPT) will increase from 10% to 12% from 1 June 2017. IPT is a tax on insurers and it is up to them whether and how to pass on costs to customers.

Air Passenger Duty (APD): regional review

A summary of responses is to be published shortly relating to a recent consultation on how the government can support regional airports in England from the potential effects of APD devolution. Given the strong interaction with EU law, the government does not intend to take specific measures now, but intends to review this area again after the UK has exited from the EU.

Freeplays in Remote Gaming Duty

Following the consultation announced at Budget 2016, the government will legislate in Finance Bill 2017 to bring the tax treatment of freeplays for remote gaming more in line with the treatment for free bets under General Betting Duty. The changes will take effect for accounting periods beginning on or after 1 August 2017.

Tobacco Illicit Trade Protocol: licensing of tobacco machinery and the supply chain

Following consultation the government will legislate in Finance Bill 2017 to introduce a licensing scheme for tobacco machinery to allow officials to quickly determine whether machines are being held legally. Applications for licences will be accepted from January 2018 and the scheme will come into force on 1 April 2018.

Implementation of the Fulfilment House Due Diligence Scheme

As announced at Budget 2016 and following a consultation on the scope and design of the scheme, the government will legislate in Finance Bill 2017 to introduce a new Fulfilment House Due Diligence Scheme in 2018. This will ensure that fulfilment houses play their part in tackling VAT abuse by some overseas businesses selling goods via online marketplaces. The scheme will open for registration in April 2018.

Soft Drinks Industry Levy

Draft legislation for the Soft Drinks Industry Levy will be published on 5 December 2016.

Tax evasion and compliance

Emerging insolvency risk

HMRC intend to develop their ability to identify emerging insolvency risk, using external analytical expertise. HMRC will use this information to tailor their debt collection activity, improve customer service and provide support to struggling businesses.

Offshore tax evasion

A new legal requirement is to be introduced to correct a past failure to pay UK tax on offshore interests within a defined period of time, with new sanctions for those who fail to do so.

Requirement to register offshore structures

The government intends to consult on a new legal requirement for intermediaries arranging complex structures for clients holding money offshore to notify HMRC of the structures and the related client lists.

Hidden economy and money service businesses

The government will legislate to extend HMRC’s data-gathering powers to money service businesses in order to identify those operating in the hidden economy.

Tackling the hidden economy

Following consultation, the government will consider the case for making access to licences or services for businesses conditional on them being registered for tax. It will also develop proposals to strengthen sanctions for those who repeatedly and deliberately participate in the hidden economy. Further details will be announced in Budget 2017.

Tax administration

Making Tax Digital

In January 2017, the government will publish its response to the Making Tax Digital consultations and provisions to implement the previously announced changes.

Tax Enquiries: Closure Rules

The government will legislate to provide HMRC and customers earlier certainty on individual matters in large, high risk and complex tax enquiries.

Tax Avoidance

Disguised remuneration schemes

Budget 2016 announced changes to tackle use of disguised remuneration schemes by employers and employees. The government will now extend the scope of these changes to tackle the use of disguised remuneration avoidance schemes by the self-employed. Further, the government will take steps to make it less attractive for employers to use disguised remuneration avoidance schemes, by denying tax relief for an employer’s contributions to disguised remuneration schemes unless tax and National Insurance are paid within a specified period.

HMRC counter avoidance

The government is investing further in HMRC to increase its activity on countering avoidance and taking cases forward for litigation, which is expected to bring forward over £450 million in scored revenue by 2021-22.

October 2016 Q&A

Q. I have recently started a new job and, for the first time in my career, I have been provided with a company car. I have to pay for fuel for private use but my employer says I can claim mileage for business journeys. Will I have to pay tax on fuel payments?

A. In addition to the company car benefit charge, employees have to pay tax on any fuel their employer provides that is used for private mileage. For 2016-17 you would calculate this amount by multiplying the car’s CO2 percentage by £22,200. So, if the percentage is 28, the tax charge for petrol is £6,216. For a basic rate taxpayer, the after-tax cash equivalent is £1,243 and for a higher rate taxpayer £2,486. The charge is the same regardless of whether you use 2 litres or 2,000 litres of fuel.

However, this tax charge can be avoided if you pay all the private fuel costs back to your employer. You need to keep accurate records (mileage logs and fuel receipts) to support such a claim to HMRC.

Your employer can give you a tax-free fuel allowance if you pay for fuel used for business travel in your company car. HMRC publish new advisory fuel rates four times a year. The most recent rates, apply from 1 September 2016.

Rates currently range from 11p per mile for smaller petrol cars (under 1400cc); 13p for those with engines between 1401cc and 2000cc; and 20p per mile for larger petrol cars (over 2000cc). Lower rates apply for cars using cheaper liquid petroleum gas (LPG), ranging from 7p (1400cc or less); 9p (1401cc to 2000cc); and 13p (over 2000cc). Rates for cars with diesel engines currently range from 9p per mile for cars with engines of 1600cc or less; 11p per mile for those with engines of 1601cc to 2000cc; and 13p per mile for those with engines larger than 2000cc. Petrol hybrid cars are treated as petrol cars for this purpose.

HMRC accept that, where an employer reimburses an employee for the cost of fuel for business mileage in a company car at the above rates, no taxable benefit arises.

A full list of past and current mileage rates can be found on the HMRC website https://www.gov.uk/government/publications/advisory-fuel-rates.

Q. I am a director of a limited company, which is registered for VAT. I have recently formed a limited partnership, with my limited company being the only general partner and another business being a limited partner. HMRC have written to me advising that I am unable to register the limited partnership for VAT as my limited company is already VAT-registered. Is this correct?

A. Yes. In a limited partnership there must always be at least one general partner with unlimited liability. A limited partnership, composed of individual limited partners, and a corporate general partner, offers a combination of total limited liability and the advantages of the partnership structure.

If a limited partnership is registered with the Registrar of Companies, then HMRC will only allow the registration in respect of the general partners, not any of the limited ones. This is because a limited partner cannot be held liable for any debts or obligations of the limited partnership. If the limited partnership goes into debt, the limited partner is liable to lose only the contribution he made to the partnership, the remaining debt will fall to the general partners.

In your case, because the limited company is already VAT-registered and is the only general partner of the limited partnership, you would be treated as the same legal entity for VAT registration purposes and would not be able to obtain separate VAT registrations.

Q. Having been an employee of a company for many years, I was appointed to the board of directors from 1 March 2016. I understand that Class 1 National Insurance Contributions (NICs) are calculated differently for directors. Can you please explain how it works and let me know what will happen for the rest of the current tax year?

A. NICs for directors are calculated by reference to an annual, rather than weekly or monthly earnings period. You became a director in week 44 of the 2015/16 tax year, which means that the primary threshold and upper earnings limit are calculated for the rest of the tax year by multiplying the weekly values by 9 (the earnings period starts with the week of appointment). So, from your date of appointment in 2015/16 to the end of the 2015-16 tax year, you will pay Class 1 NICs at the main rate of 12% on your director’s earnings between £1,008 (9 x £112) and £7,353 (9 x £817) and at the additional 2% rate on all earnings above £7,596 paid up to 5 April.

For 2016/17 you will pay Class 1 contributions evenly throughout the year. If, for example, your monthly salary is £9,000, you will pay Class 1 contributions as follows:

April (month 1) – salary £9,000 – NICs payable £112.80 (£9,000 – £8,060 (being the primary threshold) x 12%)

May (month 2) – salary £9,000 – NICs payable £1,080.00 (£9,000 x 12%)

June (month 3) – salary £9,000 – NICs payable £1,080

July (month 4) – salary £9,000 – NICs payable £1,080

August (month 5) – salary £9,000 – NICs payable £840.00 (£7,000 x 12% plus £2,000 x 2%: upper earnings limit of £43,000 reached)

September (month 6) to March (month 12) – NICs payable each month: £9,000 x 2% = £180.00

Total NICs due for tax year: £5,452.80

EU consultation on ending VAT on eBooks

The future of the chargeable rate of VAT on digital publications and eBooks is under review as the European Commission (EC) has launched a two-month consultation with a view to abolishing the current full rate VAT.

Member States currently have the option to tax printed books, newspapers and publications at a reduced rate (minimum 5%) and some Member States were granted the applications of VAT rates lower than 5% (super-reduced rates) including exemptions with a deductions right of VAT at the preceding stage (so called zero rates) to certain printed publications. Digital publications that are electronically supplied have to be taxed at the standard VAT rate.

Until 2015, there was a need for a harmonization of VAT rates for electronically supplied services and in particular electronically supplied publications, but since 1st January 2015, with the entry into force of new ‘place of supply’ rules, VAT on all telecommunications, broadcasting and electronic services is levied where the customer is based, rather than where the supplier is located. Suppliers can therefore no longer benefit from being located in the Member State with the lowest VAT rates.

While acknowledging the differences between printed and electronically supplied publications with regard to the format, they offer the same reading content for consumers and the VAT system needs to keep pace with the challenges of today’s digital economy.

The objective of the consultation is to seek the views on:

  • the commitment by the Commission in its 2016 Actions Plan on VAT to:
    • allow Member States the application of reduced rates for electronically supplied publications; and
    • allow Member States the application of super-reduced and zero rates for electronically supplied publications;
  • the definition and scope of electronically supplied publications; and
  • the potential impacts of reduced rates for electronically supplied publications.

The consultation period runs from 25 July 2016 to 19 September 2016.

Further information on the consultation can be found here.