Spring Budget 2017 VAT changes/announcements

Looking at VAT changes/announcements in the Spring Budget 2017 there is the usual £2k increase in registration and de-registration thresholds, but the most interest is in the continued crackdown on avoidance. Online sales continue to be challenged as well as the use of mobile telecoms services outside the EU, and the use of subcontractor labourers.

HMRC has already announced changes which bring about a due diligence scheme for online marketplaces and penalties for promoters of avoidance schemes. The additions announced today are:

Online sales – taking payments automatically when transactions are made

Evidence will be published this month considering the level of VAT fraud in relation to sales via online marketplaces.

HMRC is considering alternative methods of collecting VAT in this regard including using technology to allow VAT to be extracted directly from transactions at the point of purchase – the ‘split payments’ model.

B2C mobile phone services – VAT will be due on calls made outside the EU

HMRC will publish legislation before the summer recess that removes the VAT ‘use and enjoyment’ provision for mobile phone services provided to consumers, which currently means that calls made/‘enjoyed’ outside the EU are free from VAT. It will ensure mobile phone companies cannot use the inconsistency in rules to avoid UK VAT. This will bring UK VAT rules in line with the internationally agreed approach.

Fraud in the provision of labour in the construction sector

HMRC will launch a consultation on 20 March 2017 on a range of policy options to combat supply chain fraud in supplies of labour within the construction sector. Options include a VAT reverse charge mechanism, so the recipient accounts for VAT. It will also consider other changes including to the qualifying criteria for gross payment status within the Construction Industry Scheme.