VAT reverse charge anti-avoidance amendment
Updated 30 October 2018
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This publication is available at https://www.gov.uk/government/publications/vat-reverse-charge-anti-avoidance-changes/vat-reverse-charge-anti-avoidance-amendment
Who is likely to be affected
This measure does not directly affect any businesses or customers but provides a power to make regulations to amend certain anti-avoidance provisions.
General description of the measure
This measure allows for the disapplication of the existing anti-avoidance provision in section 55A(3) by Statutory Instrument in relation to any specified VAT reverse charge.
Policy objective
A VAT reverse charge works by changing who accounts for the VAT on specified supplies from the supplier to the customer. This only works where the customer is also VAT registered.
The anti-avoidance provisions were introduced to discourage attempts by fraudsters to escape a reverse charge measure by making supplies to non-VAT registered businesses instead and charging VAT.
This measure will allow regulations to be made to prevent unintended consequences for small businesses trading below the VAT threshold.
Background to the measure
This measure was announced at Budget 2018.
The need for this measure was identified from the consultation exercise for the proposed VAT reverse charge for construction services, which was the subject of a policy consultation in 2017, followed by a further consultation on the draft statutory instrument, which closed in July 2018.
Detailed proposal
Operative date
The measure will have effect on and after the date of Royal Assent to the Finance Bill 2018-19. However, it will have no practical effect unless a Statutory Instrument is made.
Current law
Section 55A(3) of the VAT Act 1994 specifies that a recipient of any supplies within the scope of a VAT reverse charge must aggregate those supplies with the value of their own supplies for the purpose of establishing whether they are liable to be registered for VAT.
Proposed revisions
The proposed measure will allow the provisions of section 55A(3) to be set aside in appropriate cases by Statutory Instrument.
Summary of impacts
Exchequer impact (£m)
| 2018 to 2019 | 2019 to 2020 | 2020 to 2021 | 2021 to 2022 | 2022 to 2023 | 2023 to 2024 |
|---|---|---|---|---|---|
| nil | nil | nil | nil | nil | nil |
This measure is not expected to have an Exchequer impact.
Economic impact
This measure is not expected to have any significant economic impacts.
Impact on individuals, households and families
The measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
It is not anticipated that there will be impacts on groups sharing protected characteristics.
Impact on business including civil society organisations
The measure will provide the government with the power to relieve burdens on small businesses by removing the requirement to include the value of reverse charge supplies received in the value of their taxable turnover.
Where that option is exercised it will ensure that small businesses receiving supplies within the scope of the specified reverse charge are not forced into registering for VAT where they would otherwise not be required to.
Operational impact (£m) (HMRC or other)
There are no operational impacts for HMRC associated with this measure.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
This measure will be kept under review, as part of the wider monitoring of the VAT reverse charge for construction services, through communication with affected taxpayer groups.
Further advice
If you have any questions about this change, contact Nick Chambers on Telephone: 03000 585 662 or email: nick.chambers@hmrc.gsi.gov.uk.