VAT partial exemption and capital goods scheme consultation
Consultation on simplification
The Tax Faculty has submitted TAXREP 75/08 in response to a consultation paper issued by HMRC with the aim of simplifying the VAT partial exemption and capital goods scheme rules. Thank you to those members who responded to the request for comments in a previous issue of the newswire.
The main points and suggestions that we have made are as follows:
- We support the ideas of an in-year provisional recovery rate, early annual adjustment and use-based option for start-up businesses and recommend that these all be made available on an optional basis.
- We are in favour of the introduction of a choice of standard partial exemption methods. At least one of these should allow for the inclusion of certain overseas supplies.
- We agree that the calculation to determine whether or not a business is below the de minimis limit should be simplified. However, we are not convinced that the method of calculation shown in the consultation document achieves this objective.
- A combined method for the calculation of recoverable input tax, taking into account supplies for business/non-business and partial exemption purposes, should be permitted.
- In the interests of simplification, we recommend that compulsory use of the Capital Goods Scheme be limited to properties with a value of over £1,000,000 only. Computer equipment should be removed from the scheme altogether. An option to treat assets under the Capital Goods Scheme should be made available for relevant assets costing between £10,000 and £1,000,000.
5 October 2008
