£133bn (No…it is not a Christmas jackpot)

VAT on its own has brought around £133bn of revenue to the Exchequer in 2018-19 according to statistics recently released by HMRC. The VAT collected in 2018-19 has increased by 5.3% compared to 2017-18.

This increase looks like this growth has been fuelled by businesses in the Administrative and Support Services sector, whose VAT liabilities increased by £820m – an increase of 6.7% from 17/18. Not surprisingly, the Wholesale and Retail sector remained the largest VAT payment contributor with £28bn in 2018-19. The Construction sector showed the biggest decrease in VAT liabilities (£340m).

More than half of net UK domestic VAT payments are accounted for by traders in the top 0.5% in 2018-19.

In the released statistics, more than 75% of traders are in a net payment position in 2018-19. Therefore, around 25% businesses are in a net VAT repayable position which is an increase of 2.5% since 2017/18.

62% of total VAT was paid by businesses with annual turnover greater than £10 million.

After incorporated companies, sole proprietors were the second largest group in terms of VAT population; this group accounted for 17% of VAT traders. However, the annual taxable turnover declared by this group only accounted for 1% of the total for 2018-19.

The VAT threshold has been frozen since 2018 to £85,000 which has led to an increase in the number of VAT registrations in 2018-19. At the same time, this frozen threshold has decreased the number of de-registrations in 2018-19. However, some small businesses, who were registered voluntarily and using the Flat Rate Scheme (FRS) deregistered for VAT after the changes in the FRS percentages since the 2016 Autumn Statement.

The challenges for HRMC – VAT evasion and missing trader intra-community frauds are still a challenge for HMRC. HMRC has introduced a domestic reverse charge scheme for a few industries (such as the construction sector which will be implementing this scheme from 1 October 2020) to tackle these issues, but it will take some time.

Michael Gove wanted to demolish VAT completely if he was to become Prime Minister. However, VAT remains one of the biggest revenue earners for the government. It is a complex tax and one that HMRC remains focused on.

At Garbutt & Elliott we are here to help you with any VAT queries you have. Please feel free to contact Naveen Sahney at nsahney@garbutt-elliott.co.uk or Alex Millar at amillar@garbutt-elliott.co.uk