VAT and Other Matters

VAT: change of standard rate

It is proposed to increase the standard rate of VAT from 17.5% to 20% with effect for any supply made on or after 4 January 2011. The rate change does not affect either zero-rated supplies nor those supplies subject to VAT at the 5% reduced rate.

VAT Flat Rate Scheme

The VAT Flat Rate Scheme simplifies VAT for businesses with an annual turnover (VAT exclusive) of up to £150,000. The percentages used in the scheme will change from 4 January 2011 to reflect the increase in the standard rate of VAT.

VAT: detailed changes

As previously announced changes will be made early next year to:

• the VAT recovery on mixed use assets
• the place of supply rules for natural gas, heat and cooling
• the definition of aircraft that can be supplied at zero rate
• certain postal services provided by Royal Mail.

Tackling tax avoidance

The government will take a more strategic approach to the risk of avoidance to prevent increasing complexity and reduce the need for frequent legislative change. In this context, the government is tackling long-standing avoidance risks in a way that makes it clear what result the legislation intends to achieve.

The government intends to examine whether the option of a General Anti-Avoidance Rule should form one element of its strengthened defences.

The government will also continue to shut down avoidance schemes as they emerge.

Inheritance tax (IHT)

The government will consult on bringing IHT on trusts within the Disclosure of Tax Avoidance Schemes regime.

Bank levy

A bank levy based on banks’ balance sheets will be introduced, following consultation, effective from 1 January 2011. It is proposed that the levy will be set at a rate of 0.07%, with a lower initial rate of 0.04% in 2011.

Disclaimer | POST ELECTION BUDGET 2010