Digital publications will also become zero-rated, while the agricultural flat rate scheme entry and exit rules are amended.
The VAT registration rates are unchanged, with few announcements. The main business changes concern:
Sanitary products
VAT is currently charged at a reduced rate of 5% on women’s sanitary products as they are treated as luxury products. From 1 January 2021, VAT will be charged at zero rate.
Digital publications
Currently, VAT is charged at the standard rate of 20% on digital publications (e-books, e-newspapers, e-magazines and academic e-journals). From 1 December 2020, VAT will be charged at zero rate, following the same rules as physical books.
The government expects the publishing industry, including e-booksellers, to pass on the benefit of this relief to consumers.
Agricultural flat rate scheme (AFRS)
New entry and exit rules will be implemented from 1 January 2021. Businesses can join the AFRS when their annual turnover for farming-related activities is below £150,000. Once annual turnover for farming-related activities exceeds £230,000, businesses must notify HMRC to be deregistered from the scheme and register for VAT instead.
Businesses with turnover that exceeds £85,000 for non-farming-related activities will still be required to register for VAT and will be ineligible for the scheme.