Included within the Autumn Statement announcements there is a commitment to fund HMRC with an additional £79m over the next 5 years to tackle more cases of serious fraud and address tax compliance risk among wealthy tax payers. We also read that “the government remains committed to ensuring HMRC has sufficient funding to enable it to maintain its compliance performance over time.”
Much effort goes into making sure HMRC focuses resources on areas where there is believed to be a tax gap, which is commendable.
Our day to day experience working with HMRC on behalf of our clients on routine matters such as VAT registrations suggests that more resource is needed in these areas too. Delays dealing with applications for months are not uncommon and the new online application system introduced on 1 September 2022 has, in our experience, created more challenges than it has solved, and creates a period of uncertainty and delay for businesses.
VAT is one of the big revenue raisers for the government, along with Income Tax and National Insurance. The 2019 manifesto seems like an age ago, but this government did pledge not to raise VAT from the current 20% rate over their 5- year term.
The VAT rate was not increased, but it was also not decreased, something many were hoping for especially those in the hospitality sector. Whilst it might have been asking for (political and economic) trouble to raise VAT now, fixing the VAT registration (and deregistration) thresholds until April 2026 will increase VAT receipts as prices rise, although some will continue to believe that the £85k threshold is a barrier to growth, given small businesses may purposely keep their turnovers below this level to avoid registration instead of aiming to grow.