VAT and other indirect taxes changes in 2024

Extension to VAT Zero Rate on Women's Sanitary Products

In January 2024, the existing zero rate relief on women's sanitary products was extended to include reusable period underwear. The products must meet certain tests to qualify.

REULA – Finance Act 2024

Starting from 1 January 2024, the Interpretation of VAT and excise legislation is affected by the Retained EU Law (Revocation and Reform) Act 2023 (REULA). REULA ends the supremacy and special status afforded to retained EU law. It also confirms that UK legislation for VAT and excise can no longer be disapplied on the basis that it is incompatible with retained EU law.

Customs Duty Waiver Scheme

In January 2024 the Government increased the maximum value of duties that can be waived over three tax years for 'at-risk' goods moved into Northern Ireland to €275,000 (~£235,000), up from €200,000 (~£170,000).

First milestone of the Border Target Operating Model

The introduction of health certification on imports of medium risk animal products, plants, plant products and high-risk feed of non-animal from the EU. The removal of pre notification requirements for low-risk and plant products from the EU.

Cross-Border Electronic Services of Payment (CESOP)

CESOP is a new EU regulation that took effect on 1 January 2024 and first returns are due by 30 April 2024. It mandates that Payment Service Providers (PSPs) report payment transactions where the payer is located within the EU and the payee is based in a second country (whether in or out of the EU). Read more in our article here.

Carbon Border Adjustment Mechanism (CBAM) in the EU and UK

For the period from 1 October 2023 to 31 December 2023, businesses importing into the EU must know and record the carbon footprint of their products. Quarterly reporting is required and the first reporting deadline fell due on 31 January 2024. Read our article on the new legislation here.

The Government has announced plans to introduce a UK CBAM from 1 January 2027. This levy will apply in certain circumstances to relevant goods imported in the aluminium, cement, ceramics, fertiliser, glass, hydrogen and iron and steel sectors.

Energy Saving Materials – More technologies and works in scope

The government extended the zero-rated relief (until 2027) for energy-saving materials to battery storage, water-source heat pumps and diverters retrofitted to ESM’s. Also, there will be a relief for specified necessary groundworks in heat pump installations, including by subcontractors.

The government will also re-introduce a relief for energy-saving materials installed in buildings used solely for a relevant charitable purpose. This relief was previously removed at the request of the EU.

Customs Declaration Service (CDS) Exports Timeline 

The Customs Declaration Service (CDS) is scheduled to replace the Customs Handling of Import and Export Freight (CHIEF) system from 4 June 2024. While the official original deadline for the use of CDS for Exports remains as 30 March 2024, declarants will have until 4 June 2024 to migrate fully after which CHIEF will no longer be open for export entries.

Second milestone of the Border Target Operating Model

From 30 April 2024, the second milestone of the Border Target Operating Model will be introduced meaning there will be documentary and risk-based identity and physical checks on medium-risk animal products, plants, plant products, and high-risk food and feed of non-animal origin from the EU. Additionally, inspections of high-risk plants/plant products from the EU will move from destination to Border Control Posts and there will be a simplification of imports from non-EU countries, including removal of health certification and routine checks on low-risk animal products, plants, plant products from non-EU countries.

Plastic Packaging Tax 

Effective from 1 April 2024, the Plastic Packaging Tax rate will rise from £210.82 to £217.85 per tonne.  

VAT Registration Threshold increased

The government has announced that, for the first time in seven years, it will increase the VAT registration threshold. The threshold goes from £85,000 to £90,000, and the deregistration threshold from £83,000 to £88,000.

VAT Treatment of Private Hire Vehicles – Upcoming consultation

The government has announced a consultation in April 2024 into the impact of the July 2023 High Court ruling in Uber Britannia Ltd v Sefton MBC. This ruling requires operators to act as principal in supplying taxi services outside London.

This has the potential to impact the VAT position of operators, many of whom currently apply agency arrangements on behalf of largely non-VAT registered drivers. 

End of VAT margin scheme for Cars in Northern Ireland

Motor vehicles sold in Northern Ireland after 30 April 2024 can no longer use the VAT margin scheme and VAT will need to be accounted for on the full selling price of the vehicle after this date. Read our Q&A - Automotive: a taxing environment driven by challenges article.

Second milestone of the Windsor Framework

From 30 September 2024, the full "green lane" will take effect for the movement of all goods between Great Britain and Northern Ireland, expanding the benefits of the UK Internal Market Scheme to end unnecessary bureaucracy. This will ensure that goods will no longer move on the basis of international customs requirements, with a new system based on commercial information. New arrangements will also come into effect for the movement of consumer parcels between Great Britain and Northern Ireland, with a new set of data-sharing requirements put in place to ensure that customs declarations are not needed for deliveries to consumers.

Third milestone of the Border Target Operating Model

The requirement for Safety and Security declarations for imports into Great Britain from the EU or from other territories where the waiver applies will come into force from 31 October 2024 as set out in the original Target Operating Model. Alongside this, HMRC will introduce a reduced dataset for imports and use of the UK Single Trade Window will remove duplication where possible across different pre-arrival datasets – such as pre-lodged customs declarations.

Trader Support Service (TSS) Extension 

HMRC has confirmed the extension of the Trader Support Service (TSS) until at least 31 December 2024. Businesses who rely on TSS should plan for the possibility the service will not be further extended. 

The government has announced an extension by a further 6 months to the six-month freeze on alcohol duty, until 1 February 2025.

VITDA implementation is expected to be delayed until 2025 at least. Read our digital age VAT in the EU – reforms on the way article.

The government has announced that it is freezing fuel duty rates for 2024-25. The temporary 5p cut in fuel duty rates will be extended until March 2025. The government has also announced that, following review, it will maintain the difference between road fuel gas and diesel duty rates until 2032.

In 2025, new arrangements for the supply of medicines into Northern Ireland are due to take effect, ensuring that medicines available in Northern Ireland are those approved by UK authorities, enabling a single licence and a single pack for medicines right across the United Kingdom.

There are expected to be changes in current Gaming Duties with Remote Gaming Duty, General Betting Duty and Pool Betting Duty expected to become a new single tax. Guidance following a Supreme Court case is anticipated.

The government has announced proposed amendments to the VAT Terminal Markets Order (TMO). The TMO is a revenue-neutral tax simplification measure for certain wholesale commodity transactions made by members on named commodity exchanges or market associations, called "Terminal Markets", where certain supplies can be zero rated.

The government plans to update the underpinning TMO legislation to allow for further reform including bringing trades in carbon credits within the scope of the TMO.

The government has announced a consultation into a proposed new levy on vaping products from 1 October 2026. The consultation implies that such a levy will apply at the import or UK manufacturing stage. This is similar to the regime announced for the planned Deposit Return Scheme and there would be processes to ensure credits and drawbacks of duty would apply. The government will also introduce a one-off tobacco duty increase of £2.00 per 100 cigarettes or 50 grams of tobacco at the same time.

HMRC have previously released guidance on the VAT treatment of EV charging and the ability of VAT registered organisations to recover VAT on such costs but have promised further clarification of policy which may be provided in 2024. In the absence of specific guidance, organisations may wish to seek other ways of obtaining comfort on the VAT recovery position for any EVs they have.

Despite much lobbying, the government did not announce the re-introduction of tax-free shopping as part of the March Budget. The government has received analysis by the Office for Budget Responsibility (OBR) and will consider those findings alongside industry representations and broader data. The government says it welcomes further representation on this relief.

The First Tier Tribunal decision regarding serviced accommodation and the application of the Tour Operators' Margin Scheme is being appealed by HMRC and is expected to be heard in 2024. The appeal could have a significant impact on those in the travel and accommodation sector.

TOMS is a complex area for VAT and often causes a great deal of confusion. We can help to review the applicability of TOMS for those businesses in the travel and tourism sectors. Some businesses may be in a position to submit protective claims considering the recent litigation in this area.

HMRC’s appeal in respect of the recent Bolt Services decision on the Tour Operators Margin Scheme (TOMS) has been accepted. We expect to see further litigation on this matter.

This high-profile case focuses on the recoverability of VAT incurred on professional fees connected to a share sale and could have implications for many other organisations who have undertaken similar transactions. The appeal at the Court of appeal was heard in 2024. Read our VAT recovery on deal costs – selling shares to fund 'downstream' taxable activity article.