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Spring Budget 2017: VAT and duties

ICAEW Tax Faculty provides analysis of the announcements relating to VAT and duties in the Spring Budget 2017.

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VAT turnover thresholds

With effect from 1 April 2017:

  • The annual taxable turnover threshold, which determines whether a person must be registered for VAT, will be raised from £83,000 to £85,000.
  • The taxable turnover threshold which determines whether a person may apply for deregistration will be increased from £81,000 to £83,000.
  • The registration and deregistration limits for relevant acquisitions from other EU member states will also be increased from £83,000 to £85,000.

The increase in the annual taxable turnover threshold means that a person will have to apply for registration if:

  • at the end of any month, the value of the taxable supplies made in the past 12 months or less has exceeded £85,000; or
  • at any time there are reasonable grounds for believing that the value of the taxable supplies to be made in the next 30 days alone will exceed £85,000.

If at the end of any month, a person's taxable turnover in the past 12 months or less exceeds £85,000 but HMRC is satisfied that it will not exceed £83,000 in the next 12 months, that person will not have to be registered.

VAT: use and enjoyment provisions for B2C mobile phone services

The VAT use and enjoyment provision for mobile phone services provided by businesses to consumers (B2C) is to be withdrawn. This will bring those services used outside the EU within the scope of UK VAT. The place of supply for UK VAT purposes is currently the country in which the phone is actually used when outside the EU. This change will also ensure that mobile phone companies will be unable to use the inconsistency to avoid UK VAT and make UK VAT rules consistent with the internationally agreed approach.

Secondary legislation to effect the change will be published before the summer recess. VAT evasion There are two measures designed to eliminate VAT fraud relating to:

  • the split payment method; and
  • provision of labour in the construction sector.

For details see the Avoidance, evasion and compliance section.

Fulfilment House Due Diligence Scheme

The government will legislate for the Fulfilment House Due Diligence Scheme (FHDDS) in Finance Bill 2017. The scheme will require all UK fulfilment houses to register with HMRC from 1 April 2018 and comply with record-keeping and due diligence standards. Following consultation, the draft legislation has been revised to provide for a disclosure gateway that will permit HMRC to disclose taxpayers’ information to fulfilment houses for the purpose of meeting their obligations under the scheme.

Minimum excise tax

The minimum excise tax (MET) will be set at £268.63 per 1000 cigarettes with effect from 00:01am on 20 May 2017. A MET sets a minimum level of total duty for all packets of cigarettes, which will tackle the very cheapest cigarettes. This change applies to cigarettes sold in the UK.

Gaming duty

The gross gaming yield (GGY) bandings for gaming duty will be raised in line with inflation (based on Retail Prices Index (RPI)). The revised GGY bandings used to calculate gaming duty must be used for accounting periods starting on or after 1 April 2017.

Remote gaming duty: freeplays

The definition of gaming payments and prizes will be amended to change the tax treatment of freeplays for remote gaming duty. The proposed legislation will ensure that, where appropriate, freeplays used to participate in remote gaming will have a value as stakes when calculating the operator’s dutiable profit, and that freeplays given as prizes will not be deductible.

Air passenger duty rates

Air passenger duty rates will increase in line with RPI from 1 April 2017 and again from 1 April 2018. Rates for 2019 to 2020 will be set at Autumn Budget 2017.

Alcohol duty rates

The duty rates on beer, cider, wine and made-wine and spirits will be increased in line with inflation (based on RPI) with effect from 13 March 2017.

A consultation will be published on 20 March 2017 on introducing a new band for still cider just below 7.5% abv. to target white ciders and the impacts of introducing a new duty band for still wine and made-wine between 5.5% and 8.5% abv.

Tobacco duty rates

The duty rates for all tobacco products were increased by 2% above RPI inflation from 6pm on 8 March 2017, in accordance with the Budget 2014 announcement that all tobacco duty rates will increase by this amount each year until the end of the current parliament.

Heated tobacco consultation

A consultation document will be published on 20 March 2017 on the duty treatment of heated tobacco products to inform future decisions on the duty regime for these products. If legislation is required following the consultation, it will be introduced in a future Finance Bill.

Vehicle excise duty uprating

Vehicle excise duty (VED) rates for cars, motorcycles and vans registered before 1 April 2017 will increase by the RPI with effect from 1 April 2017.

HGV vehicle excise duty and HGV levy

The VED for HGVs will be frozen in 2017 to 2018, including all rates linked to the basic goods rate. The government will also launch a call for evidence in spring 2017 on updating the existing HGV road user levy so that it rewards hauliers that plan their routes effectively, to incentivise the efficient use of roads, and improve air quality.

Red diesel call for evidence

A call for evidence will be published on 20 March 2017 on the use of rebated gas oil (often called red diesel) in order to improve understanding of eligible industries and current use in particular in urban areas.

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