Lowering the VAT threshold
This could be your chance to make a difference.
The Government is currently consulting on what it should do with the VAT registration limit – currently £85,000.
The current system means that going over the VAT threshold can be bad news for some businesses.
For example, if a wedding photographer has sales of £84,000 they’ll pay no VAT but increase sales by £2,000 to £86,000 they’d pay as much as £14,000 in VAT.
This ‘cliff edge’ means that businesses will take steps to keep turnover below £85,000 – like closing down for a month. I’m not sure I agree with Paul Morton of the Office of Tax Simplification when he says “We hear that cruise ships are full of people staying below the VAT threshold”.
Having a tax system that encourages people not to work isn’t a great idea so it’s likely we’ll see some change. Options include:
- a massive increase to the threshold
- a massive decrease (more likely as our threshold is the highest in Europe)
- a 2 year threshold check
- different rates of VAT for different turnover levels
As part of the consultation the Government wants your input. You can complete the anonymous survey here
