Budget 2010

VAT

VAT thresholds

The VAT registration limits increase with effect from 1 April 2010 as follows:

• the threshold for compulsory registration is £70,000
• the threshold for voluntary deregistration is £68,000.

Fuel scale charges

Businesses which recover input tax on fuel used for private motoring have to use VAT fuel scale charges to tax the private use of road fuel.

New scale charges have been published which reflect changes in fuel prices and maintain alignment with the CO2 bands that are used for income tax purposes. The new scale charges must be used for VAT periods starting on or after 1 May 2010.

VAT recovery on mixed use assets

Under existing arrangements VAT on immovable property, boats and aircraft is recoverable upfront and in full on both the business and private use of the asset (subject to any partial exemption restriction).

VAT is then payable over subsequent years in respect of the private use of the asset. This is known as ‘Lennartz’ accounting.

Changes will apply from 1 January 2011 in line with EC VAT law so that:

• the initial VAT recovery is restricted only to the business use of the asset, excluding any private use by the taxpayer or the taxpayer’s staff
• appropriate changes are made to the capital goods scheme to take account of changes in private use over subsequent years.

Other changes announced

Amendments to the place of supply rules for gas, heat and cooling.

• Status of the taxable supply of postal services.
• The zero-rating of qualifying aircraft.
• A reverse charge procedure may be introduced for certain services in order to combat Missing Trader Intra-Community fraud.

If you would like to discuss any of the above please contact us.

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