Last week Chancellor Philip Hammond delivered the 2018 Spring Statement to the House of Commons and announced a call for evidence to explore the effect of the VAT threshold on small businesses. So if you’re running a small business, the Treasury wants to hear from you about how the current VAT threshold affects you, and how they could change its design to encourage your business to grow.
What’s the VAT threshold?
Currently, you must register for VAT if your taxable turnover is over £85,000. This is known as the VAT threshold. The UK level is one of the highest globally: the average in the EU being £20,000. During the Autumn Budget announcement in 2017, the Chancellor announced that the government will freeze the threshold until spring 2020 but that reducing the level to the global norm is under consideration. This act would bring tens of thousands of small businesses into the tax net.
What does the VAT threshold survey want to know?
The consultation intends to find evidence to support or refute the idea that the VAT threshold is putting pressure on small businesses.
A report from the Office of Tax Simplification (OTS) last year voiced concern that the threshold restricts small business growth. Businesses, it stated, try to keep their turnover just below the level in order to avoid VAT liability. The OTS has suggested that the government could implement a “smoothing mechanism” to help businesses over the threshold.
Hammond wants to explore whether the VAT threshold discourages expansion, and what the Treasury can do to design it in a way so it improves small business productivity rather than hindering it.
How to fill out the survey
The survey asking questions around the VAT threshold is open until 5 June and takes around seven minutes to complete. The results are anonymous and will help the government design any future changes to the VAT threshold. You can access the survey here.
The consultation has been welcomed by various institutions, including the Chartered Institute of Taxation and The Association of Taxation Technicians. At Tax Agility, we also encourage small businesses to complete the survey.
Meeting your VAT responsibilities with Tax Agility
Meeting your VAT responsibilities is important. Tax Agility offers a no-obligation and free first consultation to understand your VAT situation, before we recommend an accounting solution tailored to your needs.
Looking for a chartered accountant in Richmond, Putney or Cavendish Square? We have offices that are local to your business and offer a range of VAT services that can help make life easier for you, including:
- Advice on the best VAT strategy for your business
- VAT registration assistance
- Assistance with the preparation of quarterly returns
- Providing VAT advice for complex financial transactions
- Investigation of VAT assessments
- VAT control and reconciliation
Call us on 020 8108 0090 today.