VAT : Budget 2012 changes to loopholes and anomalies

In Budget 2012 the Government proposed the removal of a number of ‘loopholes and anomalies’ in the coverage of VAT from October 2012: these changes would affect the VAT liability of self-storage facilities, approved alterations to listed buildings, catering & hot takeaway food, sports drinks, holiday caravans and the rental of hairdressers’ chairs. Initially it was intended to make these changes by secondary legislation, though the Finance Bill published after the Budget included legislation to prevent ‘forestalling’ – attempts to retain VAT relief after 1 October by drawing up contractural arrangements for their provision beforehand. Details were set out in a consultation document alongside the Budget.

These changes proved controversial, and the department received nearly 1,500 responses by the close of the consultation period on 18 May 2012. Further to this, the Exchequer Secretary wrote to the Treasury Committee on 28 May explaining that the Government had decided to change its approach to amending the VAT treatment of two of this list of supplies: hot takeaway food and holiday caravans. In his letter the Minister underlined that a full response to the consultation, with revised draft legislation, would be published “with a view to debate and legislation later in the summer.”

On 28 June HM Revenue & Customs (HMRC) published this response document, confirming these changes along with a number of minor amendments. Rather than enacting these changes to the VAT rules through a series of statutory instruments, the Government put down a new schedule to the Finance Bill, which was debated and approved at the Bill’s report stage on 3 July 2012. These provisions now form s196 & schedule 26 of FA2012.