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

        unless you are a basic gardener -- in which case there wont be a lot of 'products' to claim back on 

        which case you dont have the advantage of pleasing certain customers with 20% discounts on products to balance some of the increases. 

        i would hope the government are cautious and go for a small decrease aimed at picking up the large amount of people floating just under the limit - who are liable to gain from vat -- rather than hit those at a lower level that fail to gain anything much i can see, and in fact potentially lose a lot. 

        • PRO
          If you were just under the threshold and would “gain” from registering then you would wouldn’t you?
    • I know how VAT works! but there is an increase in cost which will be passed onto the customer.  Also our own costs are going to be increased by 20% plus the cost of the admin!  That's going to be a bitter pill for many customers who are often older and on fixed incomes!

      • PRO

        Not sure I understand that point - what costs will be increased by 20% ?

        • VAT on labour 

          • PRO

            Your post talks about two increased sets of costs ?

            Might just be the way I’m reading your post ....

            • There is going to be an administrative cost attached to becoming a registered business, what that cost is i have no idea yet.  if i charged £100 to cut a hedge last year the cost + VAT would make it £120 but i'm sure somewhere along the line my accountant would have more admin work the cost would be passed on.

              • PRO
                We do all our vat work ourselves as it’s reasonably simple to do yourself with modern accounts packages.
                • I had a look at the last couple of months of out goings and with the amount of VAT i have paid out its not going to be massive task. 

  • PRO

    Great report - did you know that a gingerbread man with chocolate covered trousers is subject to vat, but not if it has chocolate eyes

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