Value added tax (VAT)

Turnover limits

The VAT registration turnover limit rises to £58,000 from 1 April 2004. The deregistration limit increases to £56,000.

The annual turnover limits for the cash accounting and annual accounting schemes go up from £600,000 to £660,000 from 1 April 2004. Businesses that are already in these schemes will be able to remain in them until their taxable turnover reaches £825,000.

Disclosure rules

Businesses with supplies of £600,000 or more will have to tell Customs & Excise if they are using specific avoidance schemes on a list that will be published. Failure to disclose this will incur a penalty of 15% of the tax avoided. Businesses with supplies over £10 million will have to disclose the use of any avoidance scheme, with a penalty of £5,000 for non-disclosure. The rules will take effect soon after Royal Assent.

VAT groups

The eligibility rules for VAT groups will be tightened up from 1 August 2004 to prevent VAT avoidance by using jointly owned entities and by preventing a company being in two VAT groups at the same time.

Energy saving materials

The 5% reduced VAT rate for energy saving materials is extended to ground source heat pumps from 1 June 2004.

Demonstrator cars

Customs & Excise will be able to direct that motor traders account for VAT on the open market value of demonstrator cars where the business reclaims input tax and charges employees a nominal sum for their use. The change will take effect from a date to be announced.

VAT fuel scale charges

New scales apply from the start of the first accounting period beginning after 30 April 2004.