Partner Article

Record year for VAT receipts

The latest figures published by HMRC show that total net VAT receipts for the calendar year 2013 totalled £104 billion, overtaking both NIC and corporation tax as revenue generators in the UK, and second only to PAYE collections.

Although VAT receipts did ‘dip’ in December (0.8% lower than December 2012), the period October to December moving average was 6.3% higher than the same period 12 months ago. Indeed, at £11,553 million, October 2013 was the highest figure ever recorded in a given month.

Indeed, the UK’s 1.9 million ‘live’ traders registered for VAT in the UK, accounted for a total VAT throughput (VAT on sales and purchases) of a staggering £224 billion.

An interesting aspect of these figures is that, there could potentially be more, a lot more, income generated via VAT were the UK to follow EU proposals to ‘broaden the VAT base’.

A recent EU working group highlighted that Member States collect VAT revenues far below the level that could theoretically be collected if VAT exemptions and reduced rates were removed, and all consumption items were taxed at the standard rate.

A scenario supported by economist Professor Mirrlees who stated that the ‘regressive effects of VAT can be mitigated by providing compensations to groups such as low income earners, the unemployed, or retirees’, and that it’s possible to design packages of reforms whose aggregate effects raise GDP per capita, and reduce income inequality. The UK has however repeatedly refused to implement such proposals, although it is continually under pressure to do so.

One thing that has become apparent is that an increased focus on VAT does impact the cash flow of small businesses - particularly cash businesses, where HMRC still expects VAT liabilities to be paid, even though customers haven’t yet paid the suppliers.

Perhaps given this ‘record year for VAT receipts’, HMRC could be more accommodating in ‘time to pay’ arrangements for these small businesses.

This was posted in Bdaily's Members' News section by Baker Tilly .