The Low Incomes Tax Reform Group (LITRG) of the Chartered Institute of Taxation (CIOT) has called on the Treasury to resist pressure to lower the VAT threshold, currently £85,000, until after the implementation of Making Tax Digital (MTD) and Brexit.
The call came after the Office of Tax Simplification (OTS) urged the Treasury to examine the current threshold, prompting it to issue a call for evidence on the subject.
The level at which the VAT threshold is set is currently particularly delicate as small businesses across the UK prepare for the arrival of MTD for VAT in April 2019, which will necessitate digital quarterly reporting.
A lowering of the threshold would force even more businesses to comply with the new rules.
LITRG Chair, Anne Fairpo, said: “As VAT is based on a business’ turnover and not its profits, very many small businesses with low profits still find themselves having to deal with VAT on a day-to-day basis.”
“We are hugely concerned that any lowering of the VAT threshold now could threaten seriously a small business’ ability to remain competitive in its marketplace if its trade is mainly with non-VAT registered customers.”
Richard Dilley, Partner at George Hay, said: “Making Tax Digital and Brexit represent two big challenges on the horizon for small businesses, without adding another by reducing the VAT threshold.”
“The prospect of becoming VAT registered can be daunting for many small businesses and as a result, growth can be stunted.”
“If the threshold is set too low, this may entice some smaller businesses, which might otherwise be compliant, into the hidden economy.”
“VAT can be extremely complex and complicated to administer. Often, businesses can find it difficult to get their heads around the abundance of associated rules and regulations and indeed how to apply these correctly without the need for professional assistance.”
“In light of all the other changes they face, small businesses, upon whom the burden of VAT tends to fall disproportionately, really just want the Government to address the anomalies of VAT and improve the efficiency, simplicity and fairness of the system in the long-term”.
Here at George Hay we understand that VAT is complex and that the multifarious rules and regulations can be extremely difficult to navigate successfully. However, as is the case with any tax there is always the opportunity for planning to ensure that your VAT liability is minimised. Careful consideration should also be given to ensuring that you are fully compliant which we understand, when it comes to VAT, can seem impossible.
We can help you to recognise opportunities to plan and minimise your liabilities, we can discuss the various schemes that exist and whether they might benefit your business and we can help you to identify any potentially costly mistakes, before it’s too late. If you’d like to talk to one of our team, call 01767 315010 or fill in one of our online enquiry forms here.