VAT registration threshold – significant changes ahead:

Have your say on proposed changes to the VAT threshold.

You may wish to consider the VAT Return threshold call for evidence. It examines the effect of the current VAT threshold on small businesses and attempts to identify whether or not the current threshold provides a disincentive to small businesses to grow or improve their productivity.

The 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.

It is clear that business growth and competition is a key element and covers both those registered and non-registered businesses. There is considerable discussion around ‘financial smoothing’.

Proposed solutions are also considered. This includes the EU SME proposals that consider the following:
•VAT threshold that member states currently apply only to businesses established in that member state will be extended to small businesses established in other member states
•the national threshold will be capped at €85,000 (approximately £75,000), so significantly below the current UK threshold of £85,000
•there will be a EU-wide threshold of €100,000 (approximately £89,000),so that if a business’s total supplies in the EU reach this threshold, they will no longer be able to benefit from any national thresholds
•small businesses up to a turnover of €2,000,000 (approximately £1,770,000) will benefit from simplification schemes targeted at removing interim payments and increasing the length of the return periods to a year.

The call for evidence is available here and is open until 5 June.