UK: Deloitte Weekly VAT News - Week ended 20 May 2005

Business Brief 11/05 confirms that HMRC believe UK law will need to be changed as a result of the ECJ’s decision in the Accenture case and many outsourced services that are now VAT-free will become subject to VAT. There is to be a 12 week formal consultation period on the implementation of the changes, based on a consultation document to be published in July, following discussions with industry representatives. Businesses will be able to carry on as before until the UK law is changed, most probably early in 2006. However, some businesses may wish to rely on the terms of the ECJ’s judgment and change the treatment of their sales. There could be an opportunity for some to make retrospective claims.

HMRC have announced that they now accept that work on listed buildings used as garages can be VAT-free even if the building was not originally a garage. The building must have been used as a garage before the work. It should be possible to obtain refunds of VAT charged in the last three years on work on outbuildings, barns and the like that have been used as garages and are altered to make them more suitable for their continued use as garages as long as the work is covered by the listed building consent from the local planning authority.

We understand that a meeting of the EU’s VAT committee has recommended against the UK’s request for a lower VAT rate for repairs to listed churches, along with requests from a number of countries seeking VAT reductions. A meeting of EU finance ministers will now formally consider the requests in June. The UK operates a grant scheme that allows a refund of the VAT paid on repairs to listed places of worship and it seems probable that this will be extended if the UK’s request to apply a lower VAT rate to such work is refused.

Jersey is to introduce GST in 2008. Domestic and exported financial services and life insurance will not be subject to the tax, nor will exports or the construction and letting of residential properties. Details of the tax are expected to emerge over the next few months

We understand that a new Finance Bill, which will almost certainly bring back the Budget changes that were left out of the Finance Act 2005 when the election was announced, is to be published on 26 May. A "Ways and Means" resolution has already reinstated some of the Budget VAT changes with their original effective dates.

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