Budget 2018: A quiet day in the office for VAT

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The VAT world is full of thresholds and limits that have not changed for many years, in some cases decades. Neil Warren questions whether the VAT registration threshold will join this list of fixtures.

Having a fixed threshold, like the cash accounting threshold of £1.35m, makes it easy to remember the numbers. Contrast this with the capital allowances rates and thresholds which change more frequently than a football club changes its manager, and have indeed changed again in this Budget.  

Fixtures

After this Budget, I suspect that the VAT registration threshold of £85,000 and the deregistration threshold of £83,000, will be set in stone for many years – possibly forever.

I predicted that there would be no change to last year’s announcement that the VAT threshold would be frozen until April 2020 but the Chancellor has gone a stage further, confirming that the threshold will be frozen for a further two years until 2022.

Putting on my maths hat, and working with an annual rate of inflation of 2.5%, the threshold would have increased to about £96,000 by April 2022 under the previous policy of indexed increases to the threshold. This means that many businesses will be brought into the VAT world that would have previously escaped. But equally, there will be many business owners who will be proactive to ensure they still trade below the VAT limit, perhaps by taking more holidays and doing less work.

Side issues

Apart from this VAT threshold announcement, there was little to whet the appetite of VAT enthusiasts. The extension of group registration opportunities to some non-corporate entities will be of interest to bigger companies. Also the introduction of a possible split-payment arrangement between VAT and goods for online sales could be good for the overall tax yield. But apart from that, it was a quiet day at the office for the nation’s favourite tax. 

About Neil Warren

Neil Warren

Neil Warren is an independent VAT consultant and author who worked for Customs and Excise for 14 years until 1997.

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