The VAT threshold, the point at which you must register for VAT, has remained at £85,000 for some time despite the fact we’ve seen double digit inflation. There is now concern that this ceiling is stunting economic growth and may be forcing some business to close their doors. The main issue relates to those businesses that have taken an active decision to remain below the threshold because they fear registering for VAT would make them uncompetitive.
Recently released data would suggest that things remain tough in the economy as the number of insolvencies in August was the highest in that month in four years and the number of VAT and PAYE registered businesses overall dropped by almost 40,000.
It’s an interesting question isn’t it. In the UK we’re used to things being relatively cut and dried when it comes to VAT. There is the prevailing rate (currently 20%), zero rated VAT, (0%), VAT exempt (equally 0% but needs to be identified differently to Zero rated) and then the odd few idiosyncrasies such as energy at 5%. But by and large, the overwhelming majority of transactions will be either standard rate, 20%, or zero rated, 0%. That is unless you deal with someone like Amazon, who, it would appear, have been able to agree some of their own rates with HMRC.
When you split a business to avoid registering for VAT it is called disaggregation and HMRC can perceive this to be deliberate tax avoidance, which carries penalties and could see them treating all the individual businesses as a single entity and taxing them all equally. However, there are legitimate situations whereby disaggregation is acceptable and appropriate.
Plans to increase the frequency of reporting by the self-employed and small businesses, under the Governments Making Tax Digital (MTD) scheme, have been delayed. The next phase of roll out for MTD would have seen self-employed and small business required to maintain digital records and report their income to HMRC every quarter from April 2023. […]
Whilst there no longer appears to be anything that is truly unusual in the current climate, the Chancellor took the unusual decision to cancel November’s planned budget statement and delivered a Winter Economy Plan in its place. This move once again underlines the lack of long-term certainty that the Covid pandemic is enforcing on the […]
***UPDATE*** The Government has delayed implementation of reverse charge VAT for construction until October 2020 Original article: Companies in the construction sector need to be aware of changes which are being introduced on 1st October 2019. These changes will affect any VAT-registered construction business that: Buys in construction services from other builders and makes an […]
For around 12 months now there has been much discussion about a review of the point at which companies must register for VAT, the VAT Threshold. Currently set at £85,000 of taxable turnover, the Chancellor was reported as planning a reduction of this figure to around £20,000 as part of his budget statement in November […]