Our News
The world of taxation never stands still - and our aim in these pages is to keep you up to date with the very latest changes to UK tax and customs legislation, with particular reference to Value Added Tax.
The Spring Budget 2024
Today's Budget was one of the most hotly anticipated in years. The announcements included a reduction in National Insurance, the introduction of the 'British ISA', and changes to the child benefit threshold to name a few.
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Personal measures
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A reduction to National Insurance (NI). 2p will be taken off the Class 1 rate of NI contributions for employees, with the rate falling from 10% to 8%. The rates for people who are self-employed will also fall by another 2p down to 6%. These changes will come into effect from April 2024
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The launch of the ‘British ISA’ with an additional allowance of £5,000 aimed at increasing investment into UK companies. At this stage, it’s unknown when this will be brought into effect.
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The current ‘non-dom’ tax regime, which broadly applies to UK residents whose permanent home is overseas, will be replaced in April 2025.
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The removal of multiple dwellings relief (MDR), a bulk purchase relief in the stamp duty land tax regime, from June 2024.
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Raising the threshold for the high-income child benefit charge (HICBC) in the immediate term from £50,000 to £60,000 from April 2024. There is a longer-term plan to move to a household-based system by April 2026.
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The higher rate of capital gains tax (CGT) on residential property will be cut from 28% to 24% from April 2024. The basic rate of CGT on residential property will remain at 18%.
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The abolition of the furnished holiday lets (FHLs) regime from 6 April 2025, to rebalance the tax treatment of holiday rentals compared to long-term lets.
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Business-related measures
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An increase in the VAT registration threshold from £85,000 to £90,000, effective from 1 April 2024.
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Full Expensing (FE) is expected to be extended to leased assets for plant-leasing companies. FE provides 100% corporation tax relief for capital expenditure. This will be implemented “as soon as cost efficient to do so”, subject to consultation.
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Small Companies mandatory profit and loss filing at Companies House
Under the new rules in the Economic Crime and Corporate Transparency Act 2023 (“ECCTA”), small companies will be required to file a profit and loss account and directors’ report. Companies will no longer be able to file abridged accounts. However, in a change to the original Bill, the ECCTA includes provisions allowing the Companies House registrar to make the profit and loss accounts of small companies (or parts of them) unavailable for public inspection. This will provide comfort to those concerned about trading information becoming publicly available on the grounds of commercial sensitivity, while ensuring Companies House receives the necessary information. Implementation date has not yet been set.
Bought in Services from Overseas Fell Outside VAT Group Provisions
In JPMorgan Chase Bank NA [2023] TC 08957, the FTT found that the services provided between two VAT group companies, and which fell outside the disregard provisions applying between members of the same VAT group, formed a single composite supply, which was not an exempt supply and was therefore subject to VAT at the standard rate. As is often the case, identifying the true nature of the service or services being supplied was perhaps the most challenging aspect of this decision. But it was the contractual arrangements, as set out in the Global Master Service Agreement (GMSA), that eventually proved fatal to the appellant’s case.
Loan administration services not exempt
In Target Group Ltd v R & C Commrs [2023] BVC 39, the Supreme Court ruled that loan administration services supplied to a bank were taxable because the exemption for transactions concerning payments or transfers contained in VATA Sch. 9. Grp. 5 Item 1 did not apply.
Changes to the VAT treatment applicable on the management of certain pension schemes
Following its review of the CJEU judgment in ATP Pension Service, HMRC now accepts that pension funds meeting certain specific criteria are Special Investment Funds for the purposes of the fund management exemption. Management and administration services integral to the operation of such funds should therefore always have been exempt from VAT. This treatment will apply to funds containing the pooled assets of defined contribution occupational schemes as well as personal pension schemes. HMRC is still considering whether the judgment could have wider application, although taxpayers may rely directly on EU law to exempt services in accordance with this Brief pending amendments to UK legislation. Separately, R&C; Brief 43/2014 sets out HMRC’s revised policy on the right to deduct input tax on these services.
Private Equity Firm succesful in full VAT recovery
In Melford Capital General Partner Ltd [2020] TC07514 the FTT permitted a VAT group to recover input VAT incurred by the general partner of a limited partnership which undertook investment activities. The general partner was registered for VAT as part of a VAT group with an LLP which provided management services to the special purpose vehicles incorporated to hold the investments
Airbnb owners will have to pay VAT on rentals across EU
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An overhaul of EU rules will affect Airbnb landlords and agents for villa owners across Europe as VAT will be chargeable on all rentals.
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The EU's VAT in the Digital Age programme will have a profound impact on the travel and hospitality sectors, especially for platform operators who host rental apps ranging from accommodation providers like Airbnb and Booking.com, to taxi hailing apps including Uber, Freenow and Gett.
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Any owners of overseas property who rent out their foreign houses and apartments on third party platforms from 2025 will be caught by the rules, regardless of where they are resident. In future, VAT charges will be passed on to owners by the platform operators so an average 20% VAT should be factored into running costs of rentals.
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EU estimates indicates that up to 70% of accommodation suppliers using a platform are not registered for VAT. This means operators will have to collect the VAT registration details off all registered providers and notify authorities of VAT numbers where applicable. In addition, they will also have to notify details of all non-registered owners with tax authorities in individual member states.
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The EU Commission hopes to bring these changes into force on 1 January 2025.
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The EU plans to introduce the rules to create more tax equality as hotly and standard taxi services are all charged VAT on sales, while due to the complexity of VAT registered for individual providers of accommodation and cab services there is normally no tax charge.
Going forward, the platform operator will be responsible for paying the VAT on behalf of third party providers as they are the underlying supplier.
This means that if the accommodation owner or transport supplier is not VAT registered in the country where the property is, or where the transport is provided, then the platform must pay the VAT on the supply direct to the tax authorities.
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Now that the UK has left the EU, the rules will not be introduced here but it is likely that the Chancellor will look at the EU developments with interest if only to create more tax parity.