The Budget - Trick or Treat
The first Labour budget in 14 years was pretty light on VAT changes, with possibly the least VAT news in a couple of decades. So it seems they’ll be finding other ways to fulfil their promise of raising the £40bn that will allow them to “rebuild Britain once again”.
That said, VAT continues to be important to the HM Treasury, and is estimated to bring in £214bn in 2025/26. For context this is the biggest single tax after income tax - bigger than NIC and more than double Corporation Tax.
The main (VAT) focus contained was on the well known news surrounding the introduction of VAT on private schools. Recently there were some rumours that this would be delayed into Summer 2025, but that will not be the case and the changes are coming - as originally planned - on 1 January 2025.
If you are affect, or have clients who have concerns, please let us know, we would be happy to help with this change. HMRC have recommended that VAT registrations can be applied for now, to be effective from 1 January 2025 for those who wish to be prepared.
There was also an interesting note on the VAT treatment of private hire vehicles. This is an area we have discussed before, highlighting the legal challenges facing Uber and as they continue to be challenging HMRC on how VAT should be handled in the sector it is leaving a lot of uncertainty for other operators.
With the recently completed consultation and the flagging of this in the Budget, this remains high on the Governments agenda and is likely to be an area where they aim to get their own way, even if that requires legislation to achieve this.
The first Labour budget in 14 years was pretty light on VAT changes, with possibly the least VAT news in a couple of decades. So it seems they’ll be finding other ways to fulfil their promise of raising the £40bn that will allow them to “rebuild Britain once again”.
That said, VAT continues to be important to the HM Treasury, and is estimated to bring in £214bn in 2025/26. For context this is the biggest single tax after income tax - bigger than NIC and more than double Corporation Tax.
The main (VAT) focus contained was on the well known news surrounding the introduction of VAT on private schools. Recently there were some rumours that this would be delayed into Summer 2025, but that will not be the case and the changes are coming - as originally planned - on 1 January 2025.
If you are affect, or have clients who have concerns, please let us know, we would be happy to help with this change. HMRC have recommended that VAT registrations can be applied for now, to be effective from 1 January 2025 for those who wish to be prepared.
There was also an interesting note on the VAT treatment of private hire vehicles. This is an area we have discussed before, highlighting the legal challenges facing Uber and as they continue to be challenging HMRC on how VAT should be handled in the sector it is leaving a lot of uncertainty for other operators.
With the recently completed consultation and the flagging of this in the Budget, this remains high on the Governments agenda and is likely to be an area where they aim to get their own way, even if that requires legislation to achieve this.
The Future’s Green
As we’ve flagged previously, the UK plans to implement a Carbon Border Adjustment Mechanism (CBAM) and this was part of the Budget announcement. This will form a significant part in the Government’s longer-term Net Zero plans. The EU introduced its CBAM last October and with recent projections of $80 billion per annum in revenues by 2039, the UK version could ultimately become an important part of Government fiscal as well as environmental policy.
The Budget documents confirmed that the UK CBAM will be introduced on 1 January 2027, placing a carbon price on goods being imported into the UK that are at risk of carbon leakage. Sectors in scope will be: aluminium, cement, fertiliser, hydrogen, iron and steel. For now, the Government has removed the glass and ceramics sectors from the scope of the CBAM.
Following responses to the UK’s recent second CBAM consultation, the registration threshold will be set at £50,000 (over a twelve-month period), an increase from the £10,000 threshold originally proposed. This higher threshold will retain over 99% of imported emissions within the scope of the CBAM, whilst removing over 80% of overwise registerable businesses and is a welcome measure for micro, small and medium sized businesses as it means that over 70% of these will be removed from the CBAM altogether as a result of this higher registration threshold.
VITA expects that environmental taxes will be one of the key focus areas for governments around the world, and our partner Craig Stobo will be following the EU CBAM implementation closely. We will be sharing some thought leadership on this very soon, but if you have any initial queries or concerns, please contact him on his mobile 07703 685 163 or drop him an email at [email protected] to see how we can help.
As we’ve flagged previously, the UK plans to implement a Carbon Border Adjustment Mechanism (CBAM) and this was part of the Budget announcement. This will form a significant part in the Government’s longer-term Net Zero plans. The EU introduced its CBAM last October and with recent projections of $80 billion per annum in revenues by 2039, the UK version could ultimately become an important part of Government fiscal as well as environmental policy.
The Budget documents confirmed that the UK CBAM will be introduced on 1 January 2027, placing a carbon price on goods being imported into the UK that are at risk of carbon leakage. Sectors in scope will be: aluminium, cement, fertiliser, hydrogen, iron and steel. For now, the Government has removed the glass and ceramics sectors from the scope of the CBAM.
Following responses to the UK’s recent second CBAM consultation, the registration threshold will be set at £50,000 (over a twelve-month period), an increase from the £10,000 threshold originally proposed. This higher threshold will retain over 99% of imported emissions within the scope of the CBAM, whilst removing over 80% of overwise registerable businesses and is a welcome measure for micro, small and medium sized businesses as it means that over 70% of these will be removed from the CBAM altogether as a result of this higher registration threshold.
VITA expects that environmental taxes will be one of the key focus areas for governments around the world, and our partner Craig Stobo will be following the EU CBAM implementation closely. We will be sharing some thought leadership on this very soon, but if you have any initial queries or concerns, please contact him on his mobile 07703 685 163 or drop him an email at [email protected] to see how we can help.
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