In the Spring Statement, the Chancellor announced details of two consultations with implications for the future operation of VAT.
One of the conclusions of a recent Office of Tax Simplification (OTS) report regarding UK VAT was that the relatively high VAT registration threshold has a distortionary impact on business growth. The OTS recommended that the ‘government should examine the current approach to the level and design of the VAT registration threshold, with a view to setting out a future direction of travel for the threshold, including consideration of the potential benefits of a smoothing mechanism’. As a result the government has now published a call for evidence.
This call for evidence is split into three chapters.
- the first explores in more detail how the threshold might currently affect business growth
- the second looks in more detail at the burdens created by the VAT regime at the point of registration, and why businesses might manage their turnover to avoid registering
- the third considers possible policy solutions, based on international and domestic examples
Responses to the questions raised by the consultation should be submitted by 11:59pm on 5 June 2018
Split Payment Method of VAT collection
HMRC is also consulting on an alternative method of VAT collection to help combat VAT losses arising as a result of the expansion of e-commerce. A split payment method would see VAT separated and paid at the time of the transaction, rather than on a periodic basis via the VAT return process. Through this consultation, HMRC are asking for views on potential options for a split payment mechanism, whilst also further assessing the overall viability of split payment by seeking the views of a wider range of stakeholders.
Responses to the questions raised by the consultation should be submitted by 11:45pm on 29 June 2018