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Written question asked by Drew Hendry (Scottish National Party) on Wednesday, 16 November 2022, in the House of Commons. It was due for an answer on Monday, 21 November 2022 (named day). It was answered by Victoria Atkins (Conservative) on Monday, 21 November 2022 on behalf of the Treasury.

Small Businesses: VAT

Question

To ask the Chancellor of the Exchequer, what assessment he has made of the adequacy of the turnover threshold for small business VAT in the context of rising levels of inflation.

Answer

The Government recognises that accounting for VAT can be a burden on small businesses. This is why, at £85,000, the UK has a higher VAT registration threshold than any EU Member State and the second highest in the OECD. This keeps the majority of UK businesses out of VAT altogether.

Views on the VAT registration threshold are divided and the case for change has been regularly reviewed over the years. While some businesses have argued that a higher threshold would reduce administrative and financial burdens, others contend that a lower threshold would provide a fairer competitive environment.

In 2018, the Government consulted on how the design of the VAT registration threshold could better incentivise growth. However, there was no clear option for reform.

It was announced at Autumn Budget 2022 that the VAT threshold will be maintained at its current level of £85,000 until 31 March 2026.

Secondary information

Type
Written question
Reference
88919
Session
2022-23
Subjects
Inflation Small businesses VAT
Link
View this Written question on www.parliament.uk