Background to Legislation and how to comment

Background In his 2008 Pre-Budget Report the Chancellor announced a temporary reduction in the standard rate of VAT from 17.5 per cent to 15 per cent. In two written statements of 25 November 2008 and 31 March 2009 the Financial Secretary to the Treasury set out the scope of anti-forestalling legislation that the government intended to introduce to prevent artificial avoidance seeking to exploit the change in VAT rate. The FST made clear that the legislation was not intended to affect genuine commercial transactions and that a draft would be exposed for comment. The draft legislation has been published today on the HM Revenue & Customs (HMRC) website. The legislation counters forestalling by introducing a 'supplementary charge to VAT' to apply where an actual tax point (the date a VAT invoice is issued or prepayment received) occurs before the rate rise but the basic tax point (the provision of goods or services) is to take place afterwards. In such cases VAT of 15 per cent is due on the date of issue of the invoice or receipt of payment but a supplementary charge of 2.5 per cent becomes due on the date that the rate reverts to 17.5 per cent. The measure is restricted in its scope to avoid affecting normal commercial transactions or transactions between suppliers and fully taxable businesses which can recover the VAT they incur. Hence the supplementary charge can only apply where the customer cannot recover all of the VAT that it incurs and one of ...