The Budget 2008 - VAT and Stamp Duty

Stamp Duty exemption for alternative finance bonds: sukuk

Pursuant to Finance Act 2005 individuals or companies investing in alternative finance bonds which are similar to debt securities ("sukuk") are generally treated for tax purposes as having invested in debt securities. However, the 2005 rules did not extend to Stamp Duty. The Finance Bill will remedy the omission by classifying alternative finance bonds as "loan capital" for Stamp Duty purposes. This means that transfers of such bonds made on or after the date of Royal Assent to the Finance Bill may benefit from the Stamp Duty exemption for transfers of loan capital.

Stamp Duty exemption for alternative finance bonds: sukuk - budget notice

Stamp Duty extension of Loan Capital exemption

Currently, Stamp Duty is payable where there is a transfer of loan capital and the right to interest on the loan note instrument is determined to any extent by the results of a business or value of any property. However, in respect of transfers of loan capital subject to a capital market arrangement on limited recourse terms, a new Stamp Duty exemption will apply where such transfers are executed on or after the date of Royal Assent to the Finance Bill.

Stamp Duty extension of Loan Capital exemption - budget notice

Reduction of Stamp Duty administrative burden

A Stock Transfer Form or other written instrument that transfers ownership of stock or marketable securities (including shares) which is executed on or after 13 March 2008 where the consideration is £1,000 or less or there is no consideration does not need to be presented to HMRC: from 13 March 2008 such instruments are exempt from Stamp Duty.

Reduction of Stamp Duty administrative burden - budget notice

VAT Registration Thresholds

The taxable turnover threshold that determines whether a person is required to be registered for VAT will increase from £64,000 per annum to £67,000 per annum where:

• the taxable supplies made in the previous 12 months will at the end of the month exceed the threshold; or
• there are reasonable grounds to assume that the taxable supplies to be made in the next 30 days will exceed the threshold.

The turnover threshold at which a person may apply to deregister for VAT will increase from £62,000 to £65,000.

These changes will have effect from 1 April 2008.

VAT Registration Thresholds - budget notice

VAT Fund Management Exemption

The existing VAT exemption for the services provided by certain fund managers will be extended to include:

• overseas funds treated as recognised overseas schemes; and
• closed ended UK investment entities listed on the main Official List of the UK Listing Authority, including investment trust companies and venture capital trusts.

The exemption will no longer be available to other trust-based schemes that do not qualify as authorised unit trusts.

These changes will relate to supplies of services made on or after 1 October 2008.

VAT Fund Management Exemption - budget notice

Transitional Period for VAT Reclaims

Businesses registered for VAT between 1 April 1973 and 1 May 1997 may have either been unable to make a claim for input tax or overpaid output tax that accrued between those dates as a result of a three-year time limit for reclaims, which was introduced in 1996/1997.

A transitional period will be introduced to enable such businesses to make a claim to HMRC in respect of any such VAT. This change will be made in accordance with the House of Lords judgment in Michael Fleming (trading as Bodycraft) and Condé Nast Publications Limited v HMRC, in which it was decided that the three-year limit is not enforceable until an appropriate transitional period has been granted.

Businesses have until 31 March 2009 to make their claims.

The time limits within which HMRC will be able to reclaim sums paid in error to VAT registered businesses will be extended from two years after the end of the accounting period in which the taxpayer claims the payment to two years after the end of the accounting period in which HMRC made the payment.

The full text of the House of Lords decision in Condé Nast is available here.

Transitional Period for VAT Reclaims - budget notice