VAT thresholds: the latest update
Who is affected by the legislation?
Businesses whose turnover, or total EU acquisitions, are close to the existing VAT registration threshold of £85,000.
In 2017, The Office for Tax Simplification (OTS) highlighted the need for a government review on the VAT threshold. The VAT threshold is the highest in the EU which keeps over £3.5m small businesses exempt from the taxation. However, a report published by the OTS exposed the distortions in competition between businesses who have to charge VAT and those who do not. In light of the findings, the government have recognised the need for reform and have called upon suggestions to address the distortionary effect. However, the responses have provided little clarity on the matter and the initial concerns presented by the OTS remain.
What are the current VAT thresholds?
-The taxable turnover threshold which determines whether a person must be registered for VAT, will remain at £85,000.
-The taxable turnover threshold which determines whether a person may apply for deregistration will remain at £83,000.
The current VAT thresholds will be maintained for another 2 years from 1 April 2020 until 2022.
The policy will be reviewed again when there is more clarity after leaving the European Union (EU), with a possibility of a smoothing mechanism being introduced.
If you are unsure about how your business is affected , or have any other questions about VAT and the UK tax system, how it works, and what taxes you are required to pay, feel free to contact our team. Our professional accounting and tax advisers will be happy to assist, making sure that you are clear about your tax position, meet all requirements, and do not overpay tax.