Anti-avoidance measures

In order to combat Missing Trader International Fraud, dependant upon EU agreement, the person responsible for accounting for VAT on the sale of certain goods such as mobile phones, computer chips and other similar electronic items, will be changed from the seller to the purchaser.

From Royal Assent to the Finance Bill 2006, HM Revenue & Customs will be able to direct that additional specified records be kept such as mobile phone IMEI numbers. The existing powers of HM Revenue & Customs to inspect and mark goods will also be clarified.

With effect from Royal Assent to the Finance Bill 2006, new rules to specify circumstances where credit vouchers become liable to VAT will be introduced to combat schemes where no VAT is ever levied.

Reduced rate extension

From 1 July 2006 the sale of all contraceptive products, including sales by retailers, vending machines and the internet will be liable to the 5% reduced rate. Products supplied by medical practitioners or health professionals will be unaffected by this measure.

Partial exemption

Businesses that operate special methods rather than the standard method, will be required to declare and demonstrate that the method proposed is fair and reasonable before it will be approved. In addition the rules for the recovery of VAT for partly exempt businesses making overseas supplies will be simplified. These measures will take effect from April 2007.

Option to tax

From Royal Assent to the Finance Bill 2006 the option to tax provisions will be made clearer and easier to use. New appeal rights for refusals will be introduced.

Supplies of goods under finance agreements

The right of finance companies to treat returned goods as “neither a supply of goods nor services” and thus avoid charging VAT on the second sale, is to be removed. This will apply to cars and a wide range of goods where VAT on the first sale can be adjusted. The changes apply to agreements entered into on or after 13 April 2006 where the goods are delivered on or after 1 September 2006.

Church and faith buildings

The refund scheme for certain works will be extended to 2010/11, and will include professional fees and fixtures and fittings such as bells, pews, organs and clocks.