VAT, Excise and Other Duties

VAT thresholds

The VAT registration limits increase with effect from 1 April 2006 as follows:

the threshold for compulsory registration is £61,000
the threshold for voluntary deregistration is £59,000.

Annual accounting scheme

The annual taxable turnover limit for joining the scheme is to increase from £660,000 to £1,350,000 with effect from 1 April 2006.

Cash accounting scheme

The government intends to increase the turnover limit for joining the cash accounting scheme from £660,000 to £1,350,000.

Comment

This is an increase of more than 100% and may benefit up to one million small businesses.

Car fuel scale charges

The Chancellor announced in Budget 2005 the government’s intention to align the VAT car fuel scale charges with the income tax benefit in kind provisions. This new system is to come into force on 1 May 2007.

VAT and property

Following on from the government’s announcement that it intends to modernise, simplify and provide greater certainty for businesses dealing with some VAT and land and property matters, the legislation dealing with the option to tax provisions is to be rewritten. This will put it in clearer and easier to understand language and introduce appeal rights as well as improve practical administration.

Stamp duty

The rules are to be relaxed in respect of company reconstruction reliefs:

the requirement that the acquiring company be registered in the UK will be removed
strict rules relating to the proportion of shares held by any shareholder will be changed so that relief will be given provided there is no change in overall ownership of the reconstructed business.

The changes are to take effect from the date of Royal Assent.

Stamp duty land tax (SDLT)

A significant relief which has been available to unit trusts which acquire a property is being withdrawn. A number of measures are to be introduced to simplify and clarify the law generally. In addition Treasury regulations have been made to take a number of transactions outside the scope of SDLT including changes in the rules that deal with transfers of partnership interests.

Reliefs for alternative financing for the purchase of land and buildings by individuals are to be extended from the date of Royal Assent to include companies, clubs and trusts. The reliefs ensure that the SDLT due is no more than it would be under more traditional loan financing.