Budget 2014 – VAT and Tax Avoidance

Budget 2014
VAT prompt payment discounts

Legislation will be introduced in Finance Bill 2014 to amend the UK VAT legislation on prompt payment discounts so that it is aligned with EU legislation.

Under the current rules, suppliers account for VAT on the discounted price offered for prompt payment, even when that discount is not taken up. This amendment will ensure that VAT is accounted for on the full actual consideration paid for goods and services where prompt payment discounts are offered.

The measure will have effect for supplies made from 1 April 2015 although the measure will apply from 1 May 2014 for telecommunication and broadcasting supplies. The earlier date may also apply to other specified supplies.

VAT reverse charge for gas and electricity

A reverse charge for wholesale supplies of gas and electricity will be introduced which means customers will be liable to account for VAT rather than the supplier. The measure does not apply to domestic supplies or to businesses not registered, or liable to be registered for VAT.

The Government will informally consult on the timing with those affected, with a view to laying the necessary secondary legislation at the earliest opportunity thereafter. The measure has been announced to remove the opportunity for fraudsters to charge VAT and then go missing before the VAT has been paid over to HMRC.

Requirement for users of failed avoidance schemes

It is proposed to give HMRC the power to give notice to taxpayers who have used avoidance schemes, which are defeated in another party’s litigation, that taxpayers should amend their returns or settle their disputes with HMRC accordingly. Taxpayers who decide not to settle their case will risk a penalty.

Accelerated payments in tax avoidance cases

Following consultation, further legislation will be introduced in Finance Bill 2014 to extend accelerated payment of tax to users of schemes disclosed under the Disclosure of Tax Avoidance Schemes (DOTAS) rules, and to taxpayers involved in schemes subject to counteraction under the General Anti-Abuse Rule (GAAR), so that the amount in dispute is held by HMRC whilst the dispute is resolved.

The proposed changes around Tax Avoidance schemes are potentially far-reaching and we will comment further once the draft legislation is known. In the mean time for assistance with all aspects of taxation, contact your local Burgis & Bullock office on 0845 177 5500 or contact us online

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