VAT reform proposals could bring more small businesses into the system

An independent review has proposed significant changes to the VAT system, promising to simplify the tax burden for small business owners. But, with indications the entry threshold could be reduced, an organisation representing smaller firms has called for reform to instead focus on supporting entrepreneurs.

The Office for Tax Simplification (OTS), an independent office set up in 2010 as part of the Treasury, has published a report on the UK’s VAT system which advises HMRC to undertake a “comprehensive review” into the reduced rate, zero-rate and exemption schedules.

However, the most significant issue identified in the report was the current VAT threshold – the level of turnover above at which a business enters the system and must charge VAT on all sales. According to the report, the UK’s £85,000 VAT threshold is “one of the highest levels in the world”.

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