VAT threshhold frozen to 2020

Small businesses breathed a collective sigh of relief when chancellor Philip Hammond resisted calls to lower the VAT registration threshold in Autumn Budget 2017.

The Office of Tax Simplification (OTS) made eight core recommendations for the government to clarify the VAT system ahead of the chancellor’s speech on 22 November 2017.

It called the current VAT registration threshold of £85,000 the most pressing issue in its Routes to Simplification report.

The report claimed the UK registration threshold is the highest in the EU and £70,000 higher than the average VAT exemption around the world, which stands at £15,000.

While the UK registration threshold enables many small businesses to stay out of the VAT system, the OTS claimed recent increases could be costing the economy more than £2 billion a year.

But the chancellor decided to freeze VAT thresholds for two years in a move that was welcomed by the Federation of Small Businesses (FSB).

Mike Cherry, chairman of the FSB, said:

“It was good to see the chancellor’s speech acknowledge our concerns about the VAT threshold.

“Dragging thousands more small firms into the hugely complex VAT regime would have caused a significant drag on output at an already challenging time for businesses.

“Small firms spend more than a working week a year complying with VAT obligations on average. It’s time that should be spent growing their firms.”

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