VAT – have your say!
There was a distinct lack of bold surprises in the Chancellor's spring statement this month. As expected, Philip Hammond is saving any announcements on new tax or spending measures for the autumn budget.
However, there was one particular announcement that we think will be of great interest to our clients in the small business community. This is the news that the government is to consult on a number of tax changes over the next few months, including a possible change to VAT registration rules.
Currently, most businesses are required to register and charge VAT at 20% once their annual turnover exceeds £85,000. If businesses are trading with non-VAT registered companies or individuals, they will be forced to either charge VAT in addition to normal costs – which will increase the overall price for customers and possibly result in lost business – or take on the burden of the additional costs internally, resulting in profit margins being squeezed.
To avoid this pitfall, some companies deliberately limit their turnover in order to stay below the threshold – a process that stymies growth and deprives the Treasury of much-needed funds.
Now the government is going to consult on the potential impact of the current system and consider alternatives, such as a staggered registration to reduce the impact of this sudden cost. We can only speculate at this stage on how the staggered arrangement would work. It's possible, for example, that businesses with a turnover of between £85,000 and £100,000 would be able to claim back some of their tax bill.
Whatever your views on this, now is the time to have your say because the consultation is already open. The deadline for responses is 5 June 2018 and the address to email is firstname.lastname@example.org. Alternatively, you can write to:
RE. VAT Registration Threshold
VAT and Excise team
1 Horse Guards Road
London SW1A 2HQ
Or you can complete the online survey here.
If you have concerns over VAT and would like to chat to us, don't hesitate to give us a call. Our friendly, expert staff in offices across central London and Kent will be happy to help. Get in touch via our enquiry form today.