March 10th, 2020 / Insight posted in Articles

Budget 2020: VAT

The Budget included more announcements on VAT and other indirect taxes than we have seen in recent years. Some of these are the first tangible evidence of the UK’s divergence from the EU VAT system post-Brexit and others seem to have been motivated by recent tribunal decisions that the government is enshrining in UK law.


VAT on e-books and similar electronic publications

A zero rate of VAT will apply to e-publications from 1 December 2020, making it clear that e-books, e-newspapers, e-magazines and academic e-journals are entitled to the same VAT treatment as their physical counterparts.

Moore Kingston Smith comment

This announcement was a surprise to many commentators, but an overdue step towards modernising the VAT regime so that digital media is treated in the same way as printed equivalents. This follows the recent victory in relation to the electronic version of The Times where the tribunal accepted that this could be treated in the same way as the zero-rated hard copy edition. Even though the change in legislation only applies from 1 December 2020, the possibility remains of recovering VAT paid in the past on the basis of the tribunal decision.


Abolition of tampon tax

From 1 January 2021, the government will use freedom from EU law to enable a zero rate of VAT to be charged on women’s sanitary products.


Moore Kingston Smith comment
This is a welcome change for period poverty campaigners who have been fighting for the abolition of VAT on women’s sanitary products for years. The change is delayed until after the end of the Brexit transition as the UK would be prevented from making this change under EU law before 1 January 2021.


Reverse charge for construction services – shifting the VAT burden to the customer

As announced in September 2019, the implementation of the VAT domestic reverse charge for building and construction services, which prevents losses through so-called “missing trader” fraud, will be delayed until 1 October 2020.

Moore Kingston Smith comment

The delay has allowed more time for businesses to prepare for this change to who has the obligation to charge VAT on construction services. The shift of this obligation from suppliers to their customers will be disruptive for unprepared businesses but there is no indication of further delay. The systems and processes of construction businesses will need to be reviewed in the next six months.


VAT on imports

From January 2021, VAT due on all goods imported by businesses to the UK will be accounted for under a “deferred accounting scheme”, similar to that which has operated for some years in relation to goods imported from the EU. This means that businesses who import goods from outside the EU will not be charged VAT when the goods physically arrive in the UK, and will not have to fund that VAT until they submit their next VAT return.

Moore Kingston Smith comment

This is a change that has been much trailed, and forms part of the government’s drive to make the UK a “trade friendly” jurisdiction.  For businesses who import goods from outside the UK, this will be a very welcome change and will no doubt help many cash strapped importers considerably.