In line with the provisions of the current Value Added Tax 1994, Schedule 1 to 3A, Schedule 11 paragraph 7(1), and VAT Regulations 1995 (SI 1995/2518) regulation 5 and Schedule 1 apply equally to UK and non-UK established businesses. This allows businesses not established in the UK but make taxable supplies in the UK to use the UK VAT registration threshold. As a consequence such businesses need not register for UK VAT till the current threshold of £73,000 is breached. So both UK and non-UK businesses are subject to the same law on notifying VAT registration, deregistration and changes to VAT registration details. However, as a result of the recent European Court of Justice’s decision in the case on Schmelz C-97/09, the government has now proposed changes to the registration in effect requiring non-UK businesses to get vat-registered in the UK regardless of the value of taxable supplies made in the UK. This will bring the UK law in line with that of other EU Member States. Draft legislation now published will form part of Finance Bill 2012 and if carried will remove the benefit of the UK VAT threshold for non-UK businesses from 1 December 2012.
The new legislation defines a non-UK business to be one which has ‘no business establishment or other fixed establishment’ in the UK, and requires it to register for VAT if it makes any taxable supplies (irrespective of value) in the UK or has reasonable grounds for believing that it will do so within the next 30 days (except where it will acquire a business as a going concern in which case the liability to register will be the date of transfer). Notification of the liability to register must be made to the UK Revenue within 30 days of the liability arising. A business that becomes liable to be registered under the new legislation only ceases to be so liable if the UK Revenue is satisfied that the business has ceased to make taxable supplies in the UK or it has acquired an establishment in the UK. Exemptions from registration may be available to a person if the revenue is satisfied that the only taxable supplies the business makes or intends to make are zero-rated.
The amended law, as proposed, is as follows;
A new Schedule 1A to be added to the Value Added Tax 1994
Schedule 1A
REGISTRATION IN RESPECT OF TAXABLE SUPPLIES: NON-UK ESTABLISHMENT
Liability to be registered:
1 (1) A person becomes liable to be registered under this Schedule at any time if conditions A to D are met.
(2) Condition A is that: (a) the person makes taxable supplies, or (b) there are reasonable grounds for believing that the person will make taxable supplies in the period of 30 days then beginning.
(3) Condition B is that those supplies (or any of them) are or will be made in the course or furtherance of a business carried on by the person.
(4) Condition C is that the person has no business establishment, or other fixed establishment, in the United Kingdom in relation to any business carried on by the person
(5) Condition D is that the person is not registered under this Act.
2 (1) A person does not become liable to be registered by virtue of paragraph 1(2)(b) if the reason for believing that taxable supplies will be made in the 30-day period mentioned there is that a business, or part of a business, carried on by a taxable person is to be transferred to the person as a going concern in that period.
(2) But if the transfer takes place, the transferee becomes liable to be registered under this Schedule at the time of the transfer if conditions A to D in paragraph 1 are met in relation to the transferee at that time.
(3) In determining for the purposes of sub-paragraph (2) whether condition B is met, the reference in paragraph 1(3) to a business is to be read as a reference to the business, or part of the business, that is transferred to the transferee.
3 A person is treated as having become liable to be registered under this Schedule at any time when the person would have become so liable under paragraph 1 or 2 but for any registration that is subsequently cancelled under –
(a) paragraph 11,
(b) paragraph 13(3) of Schedule 1,
(c) paragraph 6(2) of Schedule 2,
(d) paragraph 6(3) of Schedule 3, or
(e) paragraph 6(2) of Schedule 3A.
4 (1) A person does not cease to be liable to be registered under this Schedule except in accordance with sub-paragraph (2).
(2) A person who has become liable to be registered under this Schedule ceases to be so liable at any time if the Commissioners are satisfied that (a) the person has ceased to make taxable supplies in the course or furtherance of a business carried on by the person, or (b) the person is no longer a person in relation to whom condition C in paragraph 1 is met.
Notification of liability and registration
5 (1) A person who becomes liable to be registered by virtue of paragraph 1(2)(a) or 2(2) must notify the Commissioners of the liability before the end of the period of 30 days beginning with the day on which the liability arises.
(2) The Commissioners must register any such person (whether or not the person so notifies them) with effect from the beginning of the day on which the liability arises.
6 (1) A person who becomes liable to be registered by virtue of paragraph 1(2)(b) must notify the Commissioners of the liability before the end of the period by reference to which the liability arises.
(2) The Commissioners must register any such person (whether or not the person so notifies them) with effect from the beginning of the period by reference to which the liability arises.
Notification of end of liability
7 (1) A person registered under paragraph 5 or 6 who, on any day, ceases to make or have the intention of making taxable supplies in the course or furtherance of a business carried on by that person must notify the Commissioners of that fact within 30 days beginning with that day.
(2) But the person need not notify the Commissioners if on that day the person would otherwise be liable or entitled to be registered under this Act (disregarding for this purpose the person’s registration under this Schedule and any enactment that prevents a person from being liable to be registered under different provisions at the same time).
(This is not a full text of the proposed law)
