Value Added Tax

From 1 April 2007 1 April 2006 Standard rate 17.5% 17.5% VAT fraction 7/47 7/47   Turnover Turnover Registration last 12 months or next 30 days over £64,000 £61,000 Deregistration next 12 months under £62,000 £59,000 Cash accounting scheme up to £1,350,000 £660,000 Annual accounting scheme up to £1,350,000 £1,350,000 Optional flat-rate scheme up to £150,000 £150,000

Extension to the VAT Cash Accounting Scheme

Changes to the VAT Cash Accounting Scheme (CAS) take effect from 1 April 2007.

The annual turnover limit below which businesses can start to use the scheme will increase, from £660,000 to £1.35m.

The annual turnover limit above which businesses must leave the scheme will increase, from £825,000 to £1.6m.

Under the scheme, eligible businesses can defer paying VAT until they have received payment from their customers, rather than accounting for and paying VAT when they issue and receive invoices. This is on the condition that users of the scheme can only recover VAT on purchases when they pay their suppliers.

Changes to the medical exemption

The restriction of the VAT exemption applying to medical professionals will take effect from 1 May 2007. Broadly, exemption from VAT will only apply to the provision of medical care by health professionals registered on a statutory professional register where the primary purpose of the service is the protection, maintenance or restoration of the health of the person concerned.

Land and buildings

Any business or other organisation which uses land and buildings or other assets partly for non-business purposes will be affected by new HMRC powers to make regulations about how VAT charges on non-business use are calculated. The effect of these regulations will be to shorten the period over which VAT charges on non-business use of land and buildings are paid. This will take effect on and after 1 September 2007.

Reduced rate for smoking cessation products

A reduced VAT rate of 5% for ‘over the counter’ sales of smoking cessation products will be introduced. The reduced rate will apply for one year and will take effect alongside the introduction of the ban on smoking in public places in England. Smoking cessation products that are dispensed on a prescription remain zero rated.

Gambling Act 2005 consequentials

Legislation will be introduced in Finance Bill 2007 to update VAT law on participation fees for playing bingo or other games of chance in the light of the Gambling Act 2005. This measure will maintain the VAT exemption for those exceptions listed in the law. Charges for player-to-player gaming will continue to be subject to VAT. The Gambling Act also allows charges, as opposed to stakes risked in the game, to be made for games of chance against the ‘House’. These will also be subject to VAT.

Missing Trader Intra-Community Fraud - joint and several liability

The Government today announced steps to modernise the Joint & Several Liability measure introduced in 2003, to counter potential mutations in Missing Trader Intra-Community VAT Fraud: from 1 May 2007, the goods covered by Joint & Several Liability will be extended to include electronic goods and their related parts and accessories. The implementation of the reverse charge for mobile phones and computer chips will take effect from 1 June 2007.