Deadline imminent to input into VAT threshold consultation

29 May 2018

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In its consultation on the VAT registration threshold, the government, following a report and recommendations by the Office of Tax Simplification (OTS), said it would welcome responses from small businesses, both VAT registered and unregistered, and their views on changes to the current £85,000 VAT threshold.

In its consultation on the VAT registration threshold, the government, following a report and recommendations by the Office of Tax Simplification (OTS), said it would welcome responses from small businesses, both VAT registered and unregistered, and their views on changes to the current £85,000 VAT threshold. The UK’s current VAT threshold, the highest of any country in the EU, will remain until March 2020 when there may be the opportunity for change.

The OTS had recommended examining the current approach and the benefits of a smoothing mechanism.

Sean McGinness, a Director at Saffery Champness and a member of the firm’s Landed Estates Group, comments:

“The current relatively high threshold of £85,000 means that the majority of small businesses in the UK do not have to register and consequently they do not have the added administrative burden of VAT.  For small businesses whose UK customer base is other VAT registered businesses that are able to recover VAT, registering and charging VAT may make them financially better off as it allows the potential recovery of VAT they incur on their own vatable costs.  

“However, for small businesses providing goods and services to the public or businesses unable to recover VAT, it can have a devastating impact on their profitability and competitiveness. There is evidence that the threshold acts as a cliff edge disincentive for such small businesses wanting to expand, and that many actually manage their turnover to avoid registration.”

The consultation ends on 5 June

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