OTS moots modernising jaded VAT

Is the VAT system fit for the UK economy? The Office of Tax Simplification has carried out a review of VAT and identified several areas of complexity which it has discussed in an interim report ().

On the UK’s VAT registration threshold (£83 000 for 2016-17) the OTS said this is much higher than the EU average of £20 000 and may distort business behaviour with ‘an unusual number of businesses reporting turnover at levels just below the threshold’.

It cited businesses refusing to take on another contract until the year end closing their business for a month or two each year and deciding against taking on a part-time employee or apprentice in order to remain below the threshold. Indeed 44% of businesses registered for VAT operate below the threshold.

‘While traders are entitled to take as much time off as they wish ...