Third of AAT members call for substantial increase in VAT threshold

image: cash
Tuesday 27 June 2017 - 10:30
  • 30 per cent of AAT members believe the exemption schedule should be scrapped
  • AAT members split on implications of Making Tax Digital on VAT rules

The AAT 2017 VAT Survey, a new study undertaken by AAT (Association of Accounting Technicians), has indicated support for a significant increase in the VAT threshold from more than a third (36%) of AAT members.

VAT was originally devised by the French in the 1950’s and introduced in the UK in 1973 as a condition of entry to the European Union (European Economic Community as it was then).

The threshold at which VAT becomes payable has risen significantly since its introduction, and indeed the current UK VAT registration threshold of £85,000 is the highest in the EU.

The AAT 2017 VAT Survey revealed that over a third (36%) of AAT members would like to see a “substantially increased” threshold along the lines of the £500,000 threshold currently enjoyed in Singapore.

In contrast, just 9 per cent of AAT members would like to see a reduction to £0, like that currently seen in Italy, Spain and Sweden.

However, with five per cent wanting a reduction to the personal allowance (currently £11,500) and a further 18 per cent calling for a reduction to the EU average of £25,000, support for a reduction in some form still amounts to almost a third of member’s views (31%).

This was closely mirrored by the number of AAT members who would like to see the current £85,000 threshold retained (33%).

The Government recently asked the Office of Tax Simplification (OTS) to conduct a simplification review into the VAT system. AAT will be using the results from the AAT 2017 VAT Survey to inform its response to the OTS review.

Phil Hall, AAT Head of Public Affairs & Public Policy, said:

"Whilst the single largest group of AAT members would like to see a very big increase in the VAT threshold, our survey has also shown that a similar number would welcome a reduction, and another third believe that the existing £85,000 threshold should be retained.

VAT thresholds, like VAT rates, administration and penalties, are complex issues that often divide opinion. It’s therefore imperative that the OTS ensure any proposals for reform are thoroughly considered and can command solid levels of support. We are pleased that the AAT 2017 VAT Survey can play a part in helping the OTS achieve this.”

The AAT 2017 VAT Survey also indicated that:

  • Over a third of AAT members (36%) would like definitions and boundaries for existing VAT rates to be carefully examined, and complexities reduced or better managed. There was also considerable support for the exemption schedule to be scrapped (30%) or for the standard rate of VAT to apply to all Vatable items (22%). There was very little support for the current system to be retained as it is (11%).
  • AAT members are evenly split on the likely implications of Making Tax Digital on VAT rules, with 34% believing they will not make such rules redundant, 30% thinking they will and 35% not knowing.

For the full AAT response to the OTS review of VAT, please visit our policy work page.

AAT surveyed 407 of its members, with the survey taking place during April 2017.