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VAT threshold to be lowered ?

I've long believed that the VAT threshold should be lowered or abolished to provide every business a level playing field, to reduce cash-no-vat transactions, encourage growth and generate additional tax revenue. It's a subject much discussed on LJN in the past.

The Government's OTS has just published its first review of VAT thresholds, hence are actively considering options to simplify the already complex VAT area.

Various financial pundits are suggesting a reduction to £26K or even £20K could be on the cards, with some even hoping for a £0 threshold (unlikely, I'd suggest).

The FSB produced a White Paper some time ago and are expected to review its recommendations for the SME sector to the Government.

So, it's a "watch this space" situation for now............

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      • PRO

        VAT rules are enshrined in EU law, therefore after BREXIT the Government has greater ability to change legalisation. 

        The full report covers some of this aspect.

        • Of course, that's probably why it is over complicated!

          I understand what the government are trying to achieve by lowering the threshold and i guess we  will all have to accept it, there's not a lot we can do about it.  However, I'm still not sure i understand how its going to drive out cash in hand. 

          • PRO
            I personally think it would increase the cash in hand unless it was set at zero.
            Ignoring business I don’t like vat as a consumer. It effectively taxes you on money you have already paid tax on, just like stamp duty on houses or inheritance tax but that’s another thread!
          • PRO

            Thinking aloud; a question that HMRC might ask; is a business with a T/O of under £20k (if that's the VAT threshold), a sustainable in the medium-long term ?

            • PRO

              Average self employed earnings seem extremely hard to calculate and most HMRC estimates over last 10 years have been extremely low -- 10-15 k 

              https://blog.ons.gov.uk/2017/08/14/why-is-measuring-self-employed-i...

              It would appear there is a large amount of self employed that have a 'life style' approach to earning -- flexible or part time etc

              Therefore a business such as that could be completely sustainable.

              Stats from this present VAT report are only really showing any usefull data in the 60-100 k bracket -- this doesnt give good overall data addressing the complete self employed work force 

              Why is measuring self-employed income so hard?
              Jonathan Athow explains how ONS measures earnings and how there is no easy solution to calculating self-employed income just yet. In recent years mor…
              • Dan is right, my approach is very much a lifestyle option which does make it sustainable for me.  I could go and get a job doing what i do and earn £10 an hour (if i was lucky) in our industry and i'm not sure if that is sustainable.  There's lots of Eastern Europeans working around me on farms living in substandard accommodation (portacabins) is that sustainable?   If and its a big if the limit is set a £20k or Zero then VAT would be charged on labour which as Richard said in an earlier thread is a tax on tax.   It won't force me out but many will not be able to adapt to the change and will be either forced into a cash economy or working for a larger company.  Is this why the Government want this? to either make companies employee direct or tax at source?

                Why is measuring self-employed income so hard?
                Jonathan Athow explains how ONS measures earnings and how there is no easy solution to calculating self-employed income just yet. In recent years mor…
              • PRO

                Is that figure income or T/O ?

                Are the self employed are more able to blur the differences between costs incurred for personal use vs business use which positively affects their lifestyle? Such as fuel, insurances etc?

                Why is measuring self-employed income so hard?
                Jonathan Athow explains how ONS measures earnings and how there is no easy solution to calculating self-employed income just yet. In recent years mor…
                • I don't know if that matters my T/O is higher than £20k but i run everything through the books and i'm sure like many others are careful if split costs out such as fuel and insurances.  

                  Why is measuring self-employed income so hard?
                  Jonathan Athow explains how ONS measures earnings and how there is no easy solution to calculating self-employed income just yet. In recent years mor…
                  • PRO

                    ..but I suspect many don't.....ie the vans get used for considerable private use, hence the fuel as well etc, builders doing up personal houses and reclaiming VAT against another job and so on

                    Why is measuring self-employed income so hard?
                    Jonathan Athow explains how ONS measures earnings and how there is no easy solution to calculating self-employed income just yet. In recent years mor…
                    • I suspect you are right!

                      Why is measuring self-employed income so hard?
                      Jonathan Athow explains how ONS measures earnings and how there is no easy solution to calculating self-employed income just yet. In recent years mor…
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