Value Added Tax (VAT) and Duties
Standard rate of VAT
It has been confirmed that the temporary cut in VAT will end on 1 January 2010 as planned, with the standard rate reverting from 15% to 17.5%.
The VAT flat rate scheme percentages have been recalculated accordingly, to ensure they are based on the 17.5% rate effective from 1 January 2010.
Alcohol and tobacco duty rates
As announced by the Chancellor in his 2008 Pre Budget Report, alcohol and tobacco duty rates will remain at current levels when the standard rate of VAT returns to 17.5% in January 2010.
Insurance premium tax (IPT)
Legislation will be introduced in the Finance Bill 2010, effective from 9 December 2009, to block the splitting of insurance premiums between premium and an "administration fee" to avoid IPT. IPT is currently chargeable on contracts of insurance, but not on other commissions or fees charged by way of separate contracts. HMRC is closing an avoidance scheme whereby an "administration fee" is charged to private individuals by way of separate contract and thereby not subject to IPT. The change in legislation will make separate contracts for services with private individuals that would usually form part of the insurance contract, or has or is likely to be entered into at the same time as the insurance contract, subject to IPT. The changes will only apply to contracts with private individuals at present; the position with other contracts of insurance is to be closely monitored and the provisions extended if necessary.
This provision is a further step to prevent "value shifting" to gain a tax advantage similar to the higher rate of IPT used to counter value shifting from goods to insurance to avoid VAT on certain transactions in items such as cars, domestic appliances and travel insurance.
Bingo duty
Bingo duty is to be reduced from 22% to 20% from April 2010.
