The changes announced

Although the rate of VAT remains at 17.5 per cent, a number of changes were announced:


Supplies of postal services by the Royal Mail which are not made under a licence duty (e.g. Parcelforce) and services provided on terms and conditions that have been freely negotiated, will, from 1 January 2011 be subject to VAT at 17.5 per cent rather than being VAT exempt.

The definition of aircraft for zero-rating purposes will change from 1 September 2010, such that supplies of aircraft will be zero-rated only where used by ‘airlines operating for reward chiefly on international routes’. To minimise fraud, a reverse charge on the sale of emissions allowances is effective from 1 November 2010. This means that VAT will be accounted for by the customer. The interim zero-rating for such services will be removed.

The ‘Lennartz’ principle, which allows taxpayers who use immovable property, boats and aircraft for both business and non-business purposes to recover all the VAT on such assets up front and pay for private use through ongoing charges, is to be removed. VAT fuel scale charges have been amended and will be introduced from 1 May 2010.

The VAT registration threshold will increase to £70,000 from 1 April 2010.

As set out in Pre-Budget Report 2009 (PBR), the rate of Bingo duty will reduce from 22 per cent to 20 per cent for accounting periods beginning on or after 29 March 2010. Amusement machine licence duty will increase on new licences from 26 March 2010 and gaming duty bandings will increase in line with inflation from 1 April 2010.