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Navigating VAT Changes Post-Spring Budget 2024 

By Melanie Abbott
25 Mar 2024
Accounts & Compliance

In the ever-evolving landscape of economic policies, Value Added Tax (VAT) regulations play a crucial role in shaping the business environment in the UK. With the recent announcement of changes in VAT policies during the Spring Budget of 2024, the government aims to incentivise smaller business productivity. In this article, we explore the key changes unveiled and their implications for stakeholders in light of the newly unfrozen VAT thresholds. 

Revised VAT Thresholds: 

Starting from April 1, 2024, significant adjustments have been made to the VAT registration thresholds in the UK. The compulsory VAT registration threshold for taxable turnover has been increased from £85,000 to £90,000, providing relief to businesses burdened by the previous freeze. Additionally, the threshold for cancelling an existing VAT registration has risen from £83,000 to £88,000. These revisions seek to relieve burdens of compliance for small businesses while ensuring the effectiveness of VAT systems in revenue taxation. 

Enhanced VAT Refund Scheme for DIY Builders: 

In tandem with the threshold changes, the HM Revenue and Customs (HMRC) has been granted more statutory power under the Royal Assent of the Spring Finance Bill 2024 to request additional documentation from businesses for verifying VAT refund claims within the DIY builders and converters scheme. This measure is intended to enhance transparency and combat potential misuse of the scheme, therefore safeguarding tax revenues and promoting fairness by enhancing legal scrutiny. 

VAT Treatment of Private Hire Vehicles: 

Another significant development post-Spring Budget 2024 is the government is set to conduct a consultation in April 2024 regarding the implications of the July 2023 High Court ruling in Uber Britannia Ltd v Sefton MBC.  This case determined that Uber, as the provider of journeys to passengers, should be considered the ‘Principal in all respects,’ signifying that they are the primary suppliers of complete taxi services rather than play a role as an agent, the impact particularly for Uber, as it changes their VAT position significantly. As a result, the consultation aims to address the VAT implications.  

It is implying that passengers are engaging directly with Uber as the primary provider of the taxi journey, rather than with individual drivers who might be considered as contractors. This may provide passengers with better experience and accountability of the service they receive, however there may be impacts on pricing and service standards, as Uber’s VAT position could influence their operational costs, potentially affecting fares. 

The recent amendments to VAT policies in the Spring Budget 2024 reflect the UK government’s commitment to adapting tax frameworks to the impact on the economic environment. By unfreezing VAT thresholds, enhancing refund schemes, and conducting reviews and consultations, policymakers strive to strike a balance between promoting business growth and ensuring tax compliance. As stakeholders navigate these changes, staying informed and consistently compliant will be crucial to effectively managing VAT obligations and shaping the economic landscape. 

If you would like to better understand your options, do not hesitate to get in contact, and we will do our best to advise you with a solution.

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