Weekly VAT News

King Charles III delivered the King’s Speech on 17 July 2024 at the State Opening of Parliament.

The Government’s press release issued prior to the Speech is available here, focusing on stability, economic growth and raising standards of living. The transcript of the speech is available here.

A briefing document has also been published providing information on each of the Bills introduced.

The Government’s priorities and legislative proposals include:

• Removing the VAT exemption for private school fees
• Setting up Skills England (Skills England Bill) and reforming the apprenticeship levy
• Requiring an independent assessment of tax and spending measures by the OBR (Budget Responsibility Bill)
• Strengthening audit and corporate governance (Draft Audit Reform and Corporate Governance Bill)
• Pensions investment (Pension Schemes Bill)
• Establishing an Industrial Strategy Council
• Banning exploitative employment practices and enhancing employment rights (Employment Rights Bill)
• Supporting the clean energy transition, including setting up GB Energy (Great British Energy Bill)

MPs will now debate the speech over the coming days. The House of Commons will rise for summer recess on 30 July.

Comments: The King stated in his speech that removing the exemption on private education will fund 6,500 new teachers. It is not yet clear when the change will take effect. Private schools may wish to consider the implications of the addition of VAT to school fees including changes to accounting systems, contracts, pricing, commercials, tax points spanning the change and multiple/single supply issues for instance, in relation to boarding and education supplies. It is widely expected that anti-forestalling rules will be implemented. In addition, where construction or refurbishment costs have been incurred in recent years, businesses may wish to consider whether any VAT recovery is possible.

For further information, please contact Mark Dyer.

US

The Biden Administration has reached an agreement with Mexican President Manuel Lopez Obrador to implement additional trade measures to prevent the circumvention of current US punitive tariffs imposed on steel and aluminium imports under Section 232 of the Trade Expansion Act of 1962.

While steel and aluminium products of Mexico were previously exempt from the 25% and 10% Section 232 punitive duties, respectively, along with steel and aluminium imports from Argentina, Australia, Brazil, Canada and South Korea, the Presidential Proclamation introduces a requirement that, to be exempt from the existing tariffs, steel from Mexico must be melted and poured in the US, Canada or Mexico, and aluminium from Mexico must not be smelt or cast in China, Russia, Belarus or Iran.

The Section 232 tariffs for Mexican steel and aluminium products are now effective. Importantly, the Proclamation provides that the same Section 232 tariffs would apply to steel and aluminium articles admitted to US Foreign Trade Zones under "privileged foreign status" and entered for consumption.

Companies with international supply chains, particularly with those with Mexico and China sourcing and manufacturing, may wish to identify the potential impact of these measures and explore potential mitigation strategies.

The European Commission has published a guidance document on the application of the rules of origin set out in the EU-New Zealand Free Trade Agreement which entered into force on 1 May 2024.

Under this Agreement, EU exporters that are shipping consignments of EU originating products above EUR6,000 need to make out a statement of origin for those products to allow importers in New Zealand to claim preferential tariffs. To do this the EU exporter must be registered in the REX system and state their REX number on that statement.

Please also refer to REX – Registered Exporter system.

For further information regarding global trade please contact Gerard Koevoets.