VAT Registration Threshold: Call For Evidence | Defacto-FD

VAT Registration Threshold: Call For Evidence

VAT Registration Threshold: Call For Evidence

1024 683 Fiona Purves

At Autumn Budget 2017, the Chancellor recognised that the UK had by far the highest threshold in the OECD and concerns about the cliff edge nature of the threshold. However, he noted that a high threshold has the benefit of keeping the majority of UK businesses out of VAT altogether. He announced that the government was not minded to reduce the threshold, but instead would consult on whether the design of the threshold could better incentivise growth. In the meantime, the threshold will remain at £85,000 for two years from April 2018. 

The document entitled 
VAT registration threshold: call for evidence is split into three sections:

– the first explores in more detail how the threshold might currently affect business growth;

– the second looks in more detail at the burdens created by the VAT regime at the point of registration, and why businesses might manage their turnover to avoid registering; and

– the third considers possible policy solutions, based on international and domestic examples.

By way of background, the VAT registration threshold is a simplification measure that keeps businesses with a turnover at or below the threshold from having to register and account for VAT and it is estimated that some 3.5 million businesses benefit from its existence.  The UK threshold of £85,000 is the highest in the EU and the OECD, more than double the average in the EU and the OECD which is around £29,000 for both. The VAT threshold exempts businesses from VAT, and therefore costs the Exchequer money each year. In 2017/2018 it is forecast to cost £2.1billion.

The deadline for responses to this consultation is 5 June 2018.