VAT threshold to be re-examined.
Published
22nd Nov 2017
by Charlotte Grant-West
![VAT threshold to be re-examined.](https://d3sc42dkmius1e.cloudfront.net/http://modernbarber.co.uk/wp-content/uploads/2017/11/Screen-Shot-2017-11-22-at-12.28.10.png)
Some ideas for change include:
- Raising the threshold, significantly, perhaps to £500,000, to level the playing field and reduce administration. This, however, would cut government funds by up to £6 billion per year.
- Reducing the threshold from £85,000 to £43,000, generating up to £1.5 billion per year, or even reducing the threshold to £26,000 (the national average wage), raising up to £2 billion. The result of this would mean a rise in business costs and administration.
- Reducing the ‘cliff edge’ effect of the current threshold. As it stands, as soon a business goes over £85,000 they have to pay VAT on all their turnover, not just the amount above £85,000, which immediately leaves a business £17,000 worse off.
Hilary Hall, chief executive of the National Hairdressers' Foundation, gave a cautious welcome to the government’s decision to consult on the VAT threshold, although it will be held unchanged for the next two years. “The NHF has long argued that, for a very labour-intensive industry such as hair and beauty, a more flexible VAT system would be beneficial, and so the fact the government has said it plans to look at this is potentially positive,” she said.
To read the full OTS report, go to www.gov.uk