Autumn Statement – VAT update

Autumn Statement – VAT

There were no announcements for VAT that had particular relevance for public sector bodies. However, we have summarised the general VAT announcements below.

Treatment of private hire vehicle operators

As announced at Autumn Statement 2023, the government will consult in early 2024 on the implications of the High Court’s ruling in Uber Britannia Ltd vs Sefton MBC.

The case applies to private hire vehicle operator services rather than traditional taxis.

The implications of the Sefton case are that private hire operators might have to change their operating models. Currently, most private hire operators act as agents for the drivers. The contract for the hire of minicabs is with the driver, and as most drivers do not earn more than the VAT threshold of £85,000, VAT does not have to be charged to their passengers.

However, the Sefton case suggests operators are the principals, and most would have to register for VAT.

The case does not affect traditional taxis

There have been calls to extend the zero rate for passenger transport to private hire operators

Women’s sanitary products

The government announced in the 2023 Autumn Statement that it would introduce legislation to extend the scope of the current VAT zero rate relief on women’s sanitary products to include reusable period underwear. Currently, reusable period underwear is standard-rated for VAT. The changes will take effect from 1 January 2024.

Reforms to the VAT energy-saving materials relief

In the Autumn Statement 2023, the government announced it will introduce legislation to expand the VAT relief available on the installation of energy-saving materials to additional technologies, such as water-source heat pumps, and bringing buildings used solely for a relevant charitable purpose within scope. These reforms will be implemented from February 2024.

The Retained EU Law (Revocation and Reform) Act 2023

The government will introduce legislation in Autumn Finance Bill 2023 to clarify how VAT and excise law should be interpreted in the light of changes made by the Retained EU Law (Revocation and Reform) Act 2023 (REUL Act). This was announced and draft legislation published for technical consultation on 20 October 2023.

The measure confirms that, in relation to VAT and excise law, in line with the REUL Act, it will no longer be possible for any part of any UK Act of Parliament or domestic subordinate legislation to be quashed or disapplied on the basis that it was incompatible with EU law. It also ensures that UK VAT and excise legislation continues to be interpreted as Parliament intended, drawing on rights and principles that currently apply in interpreting UK law.

The proposed changes suggest disputes involving EU law might have to be resolved in the context of different rules for pre-Brexit (to 31 December 2020), post-Brexit (1 January 2021 to 31 December 2023), and then from 1 January 2024. Additionally, there will be an end to the Supremacy of EU law in VAT disputes, with UK courts gaining more autonomy. Despite this shift, the current interpretation of UK VAT law will be maintained to protect revenue and avoid re-litigation.

As announced at Autumn Statement 2023, the government will extend the sunset date for the Freeport tax reliefs to 30 September 2031 for Freeports in England. In each Freeport, the extension will be conditional on agreement of delivery plans and will be legislated once those delivery plans are agreed. For Freeports in Scotland and Wales the reliefs will be extended from five to ten years, subject to agreement with the devolved administrations.

Read the Employment Taxes update from the Autumn Statement

Nick Burrows

Written by Nick Burrows

Nick has nearly 30 years of working with and supporting public sector bodies with VAT and indirect taxes, starting at HM Customs and Excise and then as in-house VAT Officer at Hampshire County Council. Since moving to advisory firms, Nick has had senior public sector VAT roles at RSM Tenon (now RSM), KPMG, and PSTAX (since 2014). He has led VAT advice nationally on a wide range of public sector issues and helped shape HMRC policy in several key areas.

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