The UK’s VAT registration threshold is the highest in the EU at £85,000; some people argue that it holds back growth as businesses deliberately reduce sales to remain outside the VAT net. This may be true and the Treasury is going to look at how the VAT ‘cliff edge’ can be managed better.
In the meantime, the VAT registration threshold will be frozen at £85,000 until at least 2020 and the deregistration threshold will also be fixed at £83,000. This helps you predict whether you will have to be VAT registered as at 1 April 2019.
This is the start date for the Making Tax Digital (MTD) regime, when all VAT-registered businesses with turnover above £85,000 will have to keep all their accounting records digitally and report their VAT figures quarterly to HMRC using accounting software.
The Government believes there are many ‘fly by night’ firms in the construction industry who charge VAT to their customers, then disappear before paying that VAT over to HMRC. To tackle this problem a reverse charge system for VAT will be introduced in October 2019 which will shift the VAT charge from the supplier to the customer. Businesses in the construction industry will have to adapt their account systems to cope with this change.
Traders who sell online, and don’t charge VAT when they should, undercut honest UK traders who correctly charge VAT to their customers. From early 2018, online market places will be jointly and severally liable for VAT payments due on the goods sold through their site. The website will also have to display each seller’s VAT number and check that each number is valid.