VAT expert calls for reform of “Britain’s most contentious tax” on 50th anniversary

As VAT reaches a historic milestone of fifty years in UK legislation, the pinnacle of VAT at an organisation supporting greater than 4,500 companies within the East Midlands is asking for drastic reform of Britain’s most contentious tax.

From April 2022 to February 2023, HMRC studies that it collected a staggering £150.5 billion from VAT alone – however with 428,615 UK companies closing in 2022 amid unprecedented working prices and power costs, there are requires clearer regulation to keep away from sudden prices.

Head of VAT at Duncan & Toplis, Christine Newitt, says: “Valued Added Tax is a prolific income for the federal government, behind solely Nationwide Insurance coverage and Earnings Tax – nevertheless it’s simply essentially the most contested and contentious tax for UK enterprise house owners.

“Within the 5 many years since VAT got here into power on April 1, 1973, it has been a continuing minefield for companies struggling to navigate a system with extra exceptions than it has guidelines – typically leading to sudden interpretations by HMRC even for these of us within the career who perceive the tax.”

Christine represents companies on the VAT and duties group of the Institute of Chartered Accountants in England and Wales (ICAEW) and speaks to native enterprise house owners throughout the East Midlands day-after-day, lots of that are in search of pressing recommendation on avoidable VAT pitfalls.

“I can confidently say that companies want fewer deliberately prohibitive guidelines and exclusions and clearer steerage,” provides Christine.

“VAT was launched as a directive from the European Union, however after Brexit, we’re not certain to observe these guidelines. We now have an opportunity to reimagine VAT in a manner that would profit enterprise house owners throughout the nation – VAT’s golden anniversary is a golden alternative for it to be reformed.”

Regardless of being in place for half a century, the administration of the VAT system has by no means stored tempo with advances in know-how and the worldwide market place. Christine thinks that companies may gain advantage from VAT being reformed to make it extra clear for enterprise house owners, with a a lot decreased burden of administration.

“Some nations like Brazil, for instance, have adopted a break up cost system, the place VAT is break up out on the level of sale and paid electronically on to the tax authorities.”

“This may be a daring transfer however would definitely shift the onus from over-burdened enterprise house owners, ensuring that HMRC all the time receives the tax it’s owed and giving companies the understanding of understanding that, from a VAT perspective no less than, they received’t face any sudden surprises.” provides Christine

The feedback come simply days after companies reacted to an underwhelming Spring Funds, which Head of tax at Duncan & Toplis Nicholas Smith branded “a powerful disappointment for SMEs throughout the East Midlands and the UK.”

Nicholas Smith mentioned: “SMEs make up 99.9% of the UK economic system, in response to the federal government’s personal figures. So the place is the assist for them as the price of residing disaster closes doorways throughout the nation?”

HMRC is at the moment specializing in broadening its Making Tax Digital initiative throughout all taxes, which goals to exchange the outdated paper techniques with a totally digitised providing. Development in know-how and techniques to deal with tax assortment is lengthy overdue.  It’s hoped that this can allow companies to submit updates for all taxes each quarter, quite than yearly, and make information extra updated – however Christine maintains that, for some companies, it “doesn’t go far sufficient in giving companies readability and certainty of their tax affairs”.

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