A new VAT Accounting procedure is to be implemented in October 2019 whereby the Main Contractor will become responsible for a sub-contractors VAT. In the same way in which the Construction Industry Scheme has addressed the missing tax aspect of labourers and small traders in the construction industry (by placing the burden of tax collection on Main Contractors & Developers); the purpose of the Reverse Charge for Construction Services is to reduce the occurrences of ‘disappearing trader fraud’.
VAT accounted for nearly a quarter of all UK tax revenues in 2015/2016; so it’s virtually guaranteed it will remain in place after Brexit (VAT in one form or another being in place for many non-EU countries: Switzerland, Norway, Israel & now even the United Arab Emirates).
It is common for new builds to either begin life as extensions / partial build – either becoming full demolition by a gradual erosion of the planning process or due to unforeseen structural weaknesses. Zero rating for new builds hinges on the Demolition Test, a key aspect of the test being that planning consent is in place for the full demolition of any existing structures.
The first case concerned overall eligibility for a DIY Reclaim. Whilst Mr & Mrs Treanor had been granted permission for a residential unit, it was limited to occupation and use with an adjoining workshop. Whilst the Tribunal sympathised with the Treanors, they found that HMRC were correct to reject the claim as being a ‘live-work’ unit and not passing the test of ‘being designed as a dwelling’.
The Chancellor has just finished his autumn statement announcement, and whilst there are no direct changes to the VAT legislation or recovery rules, there were some announcements that will of course be relevant to our current and prospective clients:
A petition was started to lower the rate on sanitary products in the UK. The Government already charge the lowest rate allowable for sanitary products (reduced rate – the EU prevent us from adding any more supplies to our ‘zero’ rate) but to compensate, the government will be donating £15 million of VAT collected on sanitary products to women’s health charities.
HMRC are making efficiencies equating to 18%. They are restructuring and centralising their offices, and moving to a digital approach. By the end of the decade, all taxpayers will have their own online account.