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The Office for Tax Simplification (OTS) recently published its findings following a review intended to ensure the VAT system remains relevant. On the basis of its findings, the OTS made eight core recommendations:
Several of these points refer to the threshold or exemptions that allow businesses or organisations to remain outside of the current VAT regime or pay less tax.
However, in his Autumn Budget on 22 November, the Chancellor did not announce any measures to bring the OTS recommendations into effect.
The UK has one of the developed world’s highest registration thresholds for value-added tax, which effectively provides the country’s businesses with £2 million worth of relief, by allowing them to remain outside of the regime.
In comparison to the UK’s £85,000 threshold, the EU has an average VAT threshold of £20,000, while the global average is around £15,000.
It is feared that the UK’s high threshold not only prevents the Revenue from collecting additional tax but also actively discourages businesses from expanding above the threshold.
Many businesses see VAT registration as an obstacle to competitiveness and profitability, as in most cases they will not be able to pass on the increase in their costs to customers, which provides unregistered businesses with an advantage.
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61 Friar Gate Derby DE1 1DJ