Budget Summary 2016/17

Value Added Tax

Registration threshold

Businesses will have to register for VAT when their turnover for 12 consecutive months is £83,000, with effect from 1 April 2016. Registration is required where turnover is expected to reach that threshold within the next 30 days. The threshold below which a business may deregister for VAT will be set at £81,000 from April 2016.

VAT evasion – foreign trades

The Government is taking action to tackle unfair competition from traders based overseas, who sell their goods through online marketplaces in the UK. Such traders frequently fail to add VAT to their prices, although they should do. This means they undercut UK traders who apply VAT correctly.

HMRC will be given the power to require an overseas trader to appoint a tax representative in the UK. HMRC will also be able to inform online marketplaces of the traders who have not complied. If the overseas trader continues to evade VAT and no action is taken to prevent the fraud, then the online marketplace can be made jointly and severally liable for the unpaid VAT incurred by selling in the UK via that online marketplace's website.

Businesses which provide warehouse facilities to overseas traders to store goods before they are sold in the UK will be subject to additional regulation. The warehouse facilities owner will have to meet a fit and proper person test and maintain accurate records from 2018. In addition it will be required to provide evidence of the due diligence it has undertaken to ensure overseas clients are following VAT rules.

VAT fraud

The Government is to consult on a new penalty for participating in VAT fraud, to come into effect in 2017.