In his 2018 Spring Statement, Chancellor Philip Hammond invited small businesses to provide feedback on the impact of the current VAT threshold.
In November 2017, the Office of Tax Simplification (OTS) outlined a range of measures intended to help simplify the VAT system. The OTS suggested examining the current approach to the level and design of the VAT registration threshold, and argued that the current threshold of £85,000 is ‘costly’, and that it has a ‘distortionary impact’ on business growth and activity.
The government recognises that the current design of the VAT registration threshold could be ‘disincentivising’ small businesses from expanding their firm and improving their productivity.
Its consultation will explore the effects of the VAT threshold on small businesses, and will examine different policy options, with a view to considering whether these options could better incentivise growth amongst small firms.
Businesses can contribute their views online at www.surveymonkey.co.uk/r/W7TLCZ7. The deadline for firms to respond is 5 June 2018.
Separately, the government will also consult on the creation of a new VAT mechanism for online sales, to ‘ensure that the VAT customers pay actually reaches the Treasury’.