As the Budget date inches closer it’s always interesting to look out for insights from the wider business community. The ICAEW representation for the Autumn Budget is one such paper always worth a review.
As VAT is our special area of interest our eyes were drawn to the section entitled “Make Doing Business Easier” and specifically Policy Recommendation 2A: Simply VAT.
The complexities of VAT in the UK are well known and are a result of decades of changing tax legislation; the impact of case law ( on areas from Jaffa Cakes to Marshmallows) and the interaction of political thinking on a tax regime – rates to encourage changes in behaviour, or the original joining into and then departure from the European Union. All have had their part to play in creating complexities of VAT interpretation that many countries with newer Indirect Tax systems simply do not choose to follow.
Many countries will have a much broader VAT base – basically the majority of goods or services have a VAT rate applied – but that rate is much lower that the UK standard rate with the argument that this brings less complexity and distortion from varying rates and the larger range of items covered balances the revenue generation needed to fund public services for the wider social good of all.
The ICAEW paper asks the Chancellor to consider starting a consultation around a single VAT rate with “minimal exemptions” .
The old chestnut of what to do with the VAT registration threshold with its challenge that set at £90k remains, that it creates a “cliff edge” which many smaller businesses choose NOT to venture towards and hence economic growth and employment options stall.
A broader range of VAT reforms should be considered suggest the ICAEW:
- That the review points from the 2017 Office of Tax Simplification be revisited especially now the UK is no longer tied to the EU harmonization requirements – make the VAT regime simpler to operate;
- That the UK commit to the e-invoicing direction of travel across the global tax community, which is argued to help reduce VAT fraud risk as well as easing the compliance burden on businesses as it would lead to more real-time reporting;
- That to ease the risk of international trade friction the UK co-ordinates with VAT specific initiatives such as the EU’s VAT in the Digital Age Plans (ViDA);
- To help with the challenges of the current levels of service many receive from HMRC that agents are empowered to assist more widely allied with improved, clearer tax payer guidance.
As ever, we will deal with what ever comes out on the 26th November in the Budget and be on hand to support our clients in the understanding and implementation of VAT related measures. Clearly a clean sweep to a less complex VAT regime in the UK is unlikely but could this be the Budget where a more definitive step is taken to ease the burden on businesses as the unpaid VAT collector for HMRC – we’ll be listening in on the 26th to find out be assured.
