As was expected, there were no significant changes to the VAT regulations in George Osborne’s Budget on 23rd March 2011.

Of interest to local authorities might be –

VAT status of public bodies — Legislation will be introduced to amend UK law to ensure that there is clear transposition of EU agreements relating to the VAT treatment of public bodies carrying out their statutory duties in competition with the private sector. The Government will issue draft legislation in the autumn with a view to introducing the legislation in the Finance Bill 2012.

VAT cost-sharing exemption — Consultation will continue on the options for implementing the VAT cost sharing exemption into UK legislation. This exemption is contained within Article 132(1)(f) of the Principal VAT Directive and states that:

“The supply of services by independent groups of persons, who are carrying on an activity which is exempt from VAT or in relation to which they are not taxable persons, for the purpose of rendering their members the services directly necessary for the exercise of that activity, where those groups merely claim from their members exact reimbursement of their share of the joint expenses, provided that such exemption is not likely to cause distortion of competition”

The exemption could be used by organisations such as charities, universities and housing associations wanting to make efficiency savings by working together to achieve economies of scale. Under current UK legislation a VAT cost can arise on, say, a supply of staff between the parties, creating a barrier to the sharing of costs and services. The exemption, if implemented in the UK, would, in certain circumstances, remove this VAT barrier.

Refund scheme for academies — As set out in the draft Finance Bill 2011 clauses published in autumn 2010, the Government is introducing a new VAT refund scheme with effect from 1 April 2011 to ensure that funding for academies’ non-business VAT costs is consistent with that for local authority maintained schools.

Changes in registration and deregistration thresholds — The following changes will be made to the VAT registration and deregistration threshold with effect from 1st April 2011 –

* the taxable turnover threshold for VAT registration will be increased from £70,000 to £73,000; and
* the taxable turnover threshold for deregistration will be increased from £68,000 to £71,000



Online registration and online filing — Subject to consultation on the detail, the Government will make online VAT registration, de-registration and variations to registration mandatory with effect from 1 August 2012 with a view to introducing the legislation in the Finance Bill 2012.

Approved Mileage Allowance Payments rates from 2011-12 — Where employees use their own cars for business mileage they can claim reimbursement from their employers through the approved mileage allowance payments rates (AMAPs) which is not regarded as a taxable benefit. There is currently a higher rate of 40p per mile for the first 10,000 miles of business use and 25p per mile thereafter.

A statutory instrument, laid on 23 March 2011, will increase the higher rate to 45p per mile with effect from 6 April 2011. Should the majority, if not all, of the increase be attributable to fuel the VAT recovery per mile will increase.


and possibly of interest –

Low value consignment relief — This allows the VAT free importation into the UK of low value goods, for example, DVDs from the Channel Islands. Legislation will be introduced in the Finance Bill to reduce the level at which the low value consignment relief (LVCR) applies from £18 to £15. This will be effective from 1 November 2011. HMRC will reconsider this again in the 2012 Budget with a view to reducing it further if discussions with the European Commission do not produce a workable solution.

and for other indirect taxes –

Rates of landfill tax from 2012 — Legislation will be introduced in the Finance Bill 2011 to increase the standard rate of landfill tax by £8 per tonne for disposals made to landfill on or after 1 April 2012. This will increase the rate to £64 per tonne. In the June Budget the Government confirmed that the standard rate of landfill tax would rise by £8 per tonne on 1 April each year up to and including 2014. The Government also announced a floor under the standard rate of landfill tax so that the rate will not fall below £80 per tonne from 2014-15 to 2019-20.