Indirect taxes

VAT

A number of changes in the area of VAT have been announced:

• The VAT exemption for fund management will be extended to cover UK-listed investment entities. Draft legislation and guidance will be issued in April.
  
  
• The limit for correcting errors on previous returns in a later return will increase to the greater of £10,000 or 1% of turnover (subject to a cap of £50,000). This will apply for returns covering VAT, insurance premium tax, air passenger duty, landfill tax, climate change levy and aggregates levy.
  
  
• New VAT scale charges on fuel used for private motoring, determined by reference to the level of CO2 emissions, have been amended to reflect the recent changes in fuel prices.
  
  
• The reduction in VAT to 5% on over-the-counter pharmaceutical smoking cessation products will continue beyond 1 July 2008.
  
  
• VAT legislation regarding the option to tax property will be simplified. New measures will be introduced to allow taxpayers to revoke an option to tax after 20 years.
  
  
• Following the Conde Nast case, legislation will be introduced in Finance Bill 2008 to allow certain businesses to make claims for overpayment or under-recovery of VAT outside of the three year claim limit. This transitional rule will apply until 31 March 2009. In additon, the time limit for VAT assessments and repayment claims will be extended from three to four years from 1 April 2010.
  
  
• In an announcement of key interest to recruitment and employment agencies and their customers, the staff hire concession is to be withdrawn with effect from 1 April 2009.

There have also been a number of changes affecting other indirect taxes including landfill tax, climate change levy, aggregates levy and amusement machine licence duty.

Alcohol and tobacco duties

The duty on beer is increased by 4p per pint and on cider by 3p per litre, on wine by 14p per 75cl bottle and sparkling wine by 18p per 75cl bottle. Duty on spirits is increased by 55p on a 70cl bottle. Tobacco duties are increased by 11p per packet of 20 cigarettes.

Stamp taxes

Instruments transferring stocks and shares that were previously chargeable with £5 fixed stamp duty will in future be exempt and will not need to be reported. Measures have also been announced to reduce the numbers of stamp duty land tax (SDLT) transactions which need to be reported.

The Budget also introduced an exemption on transfers of loan capital which are subject to a capital market arrangement on limited recourse terms. Rules are also proposed to classify alternative finance investment bonds as loan capital.

Stamp duty on new zero-carbon flats will be charged at 0% on values up to £500,000 with retrospective effect from 1 October 2007.

Anti-avoidance measures have been introduced to address a number of areas:

• transfers of interest in property within an investment partnership;
• group relief where the purchasing company leaving the group avoids a clawback of SDLT; and
• avoidance of SDLT through the use of alternative finance relief.