Clearways Accountants has taken part in a survey undertaken by the ICAEW (Institute of Chartered Accountants in England and Wales) which gathered member’s views on the VAT registration threshold. Readers may not be aware but HMRC are reviewing the impact of the current £85,000 threshold to see if it distorts business.

HMRC believe business may deliberately stay below the threshold.

The Survey Findings

The survey results have been sent to HMRC and they show that 49% thought that the threshold should be raised, 16% thought lowered and the remaining 35% thought the current limit was about right and should be unaltered.

Evidence was submitted that a number of small business took holidays or stopped working when their turnover reached the registration threshold. It was agreed that the record keeping and administrative work of preparing and filing VAT Returns was a disincentive to growth and this is especially true with the compulsory “making tax digital” requirement, coming in April 2019.

So what happens next?

We think that the Government would not lower the threshold but may leave the limit unchanged for a number of years so that over time (with inflation) more and more small business are brought into the VAT net.  If this is the Government’s plan then they should take another look at the Flat Rate Scheme for small businesses and remove the “limited cost trader” clauses and make the scheme genuinely easy to administer.

All we can do now is watch this space and see if any comments are made in the Budget this Autumn.