"The case for arguing that a significant cut to the VAT registration threshold will stimulate growth is far from clear cut. A sudden, material reduction in the current £90,000 VAT threshold would bring large numbers of small businesses into the scope of quite a complicated tax. The impact of higher prices on consumer spending is likely to hit business's profitability and in turn investment and employment."
"Reducing the threshold is unlikely to yield a significant increase in the tax take for the Government. HMRC's VAT statistics for 2023 / 2024 show that more than 77% of the total VAT take of £168bn is paid by businesses with turnovers of £10m+. Only about £3.9bn in total is paid by businesses with turnovers of £150k or less, with the total VAT payable typically lower the smaller the business."
"Many of the think tanks and academics that favour bringing the threshold down significantly or removing it often talk about the benefits seen in smaller countries like New Zealand. But the UK economy and VAT system differ significantly from New Zealand, which has a much less complex equivalent to VAT, the Goods and Services Tax (GST) system, and the number of registered busines"
Reducing the VAT registration threshold would force many small firms to charge 20% VAT and incur additional compliance costs, producing an initial inflationary impact. Service businesses selling to consumers would be especially affected. A material cut from the current £90,000 threshold would bring large numbers of small businesses into a complicated tax, likely reducing consumer spending through higher prices and harming profitability, investment, and employment. HMRC data for 2023 / 2024 show more than 77% of the £168bn VAT take is paid by firms with turnovers above £10m, while around £3.9bn is paid by firms with turnovers of £150k or less. Greater HMRC demands would yield little fiscal gain.
Read at London Business News | Londonlovesbusiness.com
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