MHA VAT Newsletter | October 2024 |
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Welcome to the latest edition of our monthly VAT newsletter, packed with news and insights to keep you updated on the world of VAT. Additionally, we provide updates on various other indirect taxes including customs duties, plastic packaging tax, environmental taxes and excise duties.
Should you have any questions, please do not hesitate to contact us. We hope you find our newsletter interesting and informative; please do feel free to forward to anyone you think would find it useful.
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Articles featured in this issue: |
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 | During the general election campaign, the Labour Party was clear that if it formed the next government, it would not increase the headline rate of VAT. We therefore assume that Rachel Reeves’ first Budget as Chancellor will leave the standard rate of VAT unchanged at 20%. In this article Jonathan Main considers what other changes could be made to plug the claimed shortfall in public finances. |
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 | The agreement made between the previous UK Government and EU Commission back in February 2023 was designed to simplify the documentary requirements for the movement of goods from Great Britain to Northern Ireland whilst satisfying the EU’s requirements for sufficient risk-based controls. As Andrew Thurston notes, on the 20th September 2024, it was announced that the measures being implemented for parcel movements to Northern Ireland will be delayed from their original 1st October 2024 implementation to the 31st March 2025.
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 | The Chancellor has used the Labour party conference to announce that the government wants to promote the wider use of electronic invoicing (‘e-invoicing’) across UK businesses and government departments. HM Revenue & Customs will shortly be launching a consultation on the introduction of ‘e-invoicing’. In this insight, Robin Prince explores what e-invoicing entails, how other countries have implemented it, and what steps are expected to follow in the UK.
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 | HMRC published updated guidance on the VAT changes for private and independent schools on 10 October 2024. This insight, prepared by Jonathan Main, provides you with a summary of the changes, to help you prepare for the introduction of VAT from 30 October 2024.
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 | After weeks of hearsay, the EU Commission has officially proposed delaying the implementation of the EU Deforestation Regulation (EUDR). The Commission stated that additional time is required to allow global stakeholders, Member States and third countries time to prepare. As Andrew Thurston highlights, the proposal would delay the implementation of the EUDR by 12 months (to 30th December 2025).
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Glyn Edwards, VAT Director comments, let them eat cakes, take aways and Caviar |
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Given our Chancellor is facing increasing challenges with her upcoming Budget in finding taxes to raise we have three palatable and not so palatable ideas for her.
First get rid of the decades old famous anomaly that allows Cakes to be exempt from VAT. It’s recently been estimated that the UK consumes about £3.2bn worth of cake each year so that would raise £640 million for the Exchequer – assuming cake consumption holds up and we don’t all start eating carrots instead.
Secondly the fast food market in the UK was valued at £13.4bn in 2022 and estimated to rise to £17bn by 2026. VAT is already charged on hot food delivery at the standard rate (although not ice cream). Raising the 20% rate to 25% would presumably encourage a more healthy lifestyle and raise £850m in extra revenues for the Treasury.
So, combining one and two would actually raise more money than the controversial VAT on private school fees which according to the IFS is between £1.3b and £1.5bn
Finally, Caviar has always been exempt from VAT. Assuming all the Caviar consumers haven’t already fled the country over concerns about other punitive measures being introduced in the Budget this is surely a product that the Chancellor should be looking to introduce VAT on. There are no reliable figures on the size of the UK market but Fortnum and Mason advertise a 500g tin of Beluga caviar for £3500. VAT would add £700 to the price but surely this would fit in with Labour’s idea of ‘the broadest shoulders bearing a bigger burden’.” |
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Why are we taxing tourists? |
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Sue Rathmell, VAT & Indirect Tax Partner at MHA joined Philippa Lamb and other guests on Behind the Numbers podcast to discuss the introduction of tourism taxes in the UK. |
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We are delighted to invite you to MHA’s private schools VAT webinar on Thursday 31 October 2024 from 12pm – 1pm.
The imposition of VAT on private school fees is potentially the most seismic shift to VAT since its introduction on 1 April 1973. Our engagement with clients in the weeks since the publication of draft legislation and guidance has highlighted a myriad of issues to address in the short time available prior to 1 January 2025.
The Budget on 30 October is expected to bring more detail around key issues including pre-registration input tax and when to register for VAT. |
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 | Laura Stevenson Laura is a Senior VAT Manager based in our Northampton and Peterborough offices. Prior to Joining MHA in March 2018, Laura worked at HM Revenue & Customs for 14 years. For her last 5 years in HMRC Laura worked on the Tax Avoidance and Partial Exemption (TAPE) Team, her main focus was Partial Exemption. Laura’s areas of responsibility included considering partial exemption special methods, project work, and the provision of support and advisory services to indirect tax specialists within HMRC. |
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MHA’s VAT and Customs Duty team at our recent MHA Indirect Tax Conference |
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 | Fun VAT Fact of the month Chocolate Nesquik is zero-rated for VAT purposes (classified under cocoa products), while the Banana and Strawberry flavours are standard rated. The reason behind this distinction is that when VAT was introduced in 1973, cocoa-based drinks were treated similarly to tea and coffee, as cocoa was a popular beverage in the UK at the time. This historical context led to cocoa-related products, like Chocolate Nesquik, receiving zero-rated VAT status.
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