Head of ICAEW Tax Faculty, Frank Haskew, has responded to a report from the Office of Tax Simplification (OTS), ‘which makes a number of recommendations on VAT’, says a recent ICAEW press release.
He explains why we don’t want to see the threshold lowered.
‘VAT was introduced in 1973 as a ‘simple tax’’, it quotes him.
‘Since then it has become vastly more complicated to administer and is a significant burden that falls disproportionately on smaller businesses.’
This, he says, explains why the threshold was ‘raised substantially in the early 1990s, and the current VAT registration limit of £85,000 is the highest in the EU.’
This means your ‘VAT taxable turnover’ – i.e. ‘the total value of everything you sell that isn’t exempt from VAT’, according to Gov.uk – amounts to more than £85,000 in any given 12-month period.
If it doesn’t, you’re exempt.
‘In 2015’, says the new ICAEW press release, ‘the Government confirmed that ‘We believe that the UK’s current registration threshold achieves a reasonable balance between competing interests and reduces the administrative burden on the smallest businesses.’’
The OTS report has revisited the question of threshold.
It, says the release, ‘sets out the advantages and disadvantages of raising, lowering or maintaining the current threshold and suggested that VAT rates be reviewed.’
Frank Haskew sets out ICAEW’s position:
‘Although the current VAT registration threshold of £85,000 is high, it is in practice a major simplification measure for smaller businesses.’
This ICAEW applauds.
‘We believe it should be retained at its current level or consideration be given to increasing it further, perhaps with measures to ease businesses into VAT to avoid the ‘cliff edge’ effect.’’
We’ll keep you posted.