VAT receipts hit record £133bn

The amount of VAT collected in the last year has risen by 5.3% to a record £133bn driven by the wholesale and retail sectors, despite widespread VAT evasion

The latest 2018/19 figures from HMRC show revenue up £7bn from £126bn in the comparable period 2017/18. Over the last decade VAT take has risen 52% from £87.6bn i 2008/09.

Incorporated companies accounted for the largest share of the VAT population and annual taxable turnover. This group accounted for 73% of traders, and 93% of annual taxable turnover in 2018-19.

Sole proprietors were the second largest group in terms of VAT population accounting for 17% of VAT traders. However, the annual taxable turnover declared by this group only accounted for 1% of the total for 2018-19.

Over 62% of total net domestic VAT declared was paid by traders with an annual turnover greater than £10m. Just over half of household VAT-able expenditure is from restaurants and hotels, transport, and recreation and culture.

The latest tax gap figures show that the VAT gap has risen in the past two years to £12.5bn, partly down to rising VAT debt which has hit £2.2bn. HMRC estimates that 9.1% of due VAT is not collected, representing 36% of the total uncollected tax.

VAT fraud ranges from organised criminal groups smuggling goods such as alcohol or tobacco, VAT repayment fraud and VAT missing trader intra-community (MTIC) fraud.

New registrations have also increased steadily since 2009-10, rising over the last 12 months to 1.09m, in part linked to the freeze in the VAT registration threshold at £85,000 from 2018.

The number of de-registrations has hit 902,000, attributed to the government’s policy changes in relation to the flat rate scheme (FRS) which saw the rate of VAT for this segment increase to 16.5%, a measure first announced in Autumn Statement 2016 and effective from April 2017, HMRC said. VAT FRS was introduced in 2002 to simplify VAT for businesses with an annual turnover up to £150,000, tax exclusive and was subsequently amended in 2017.

VAT reporting changed this year with the introduction of Making Tax Digital for VAT from 1 April 2019, which mandates that all VAT must be digitally reported to HMRC on a quarterly basis, rather than quarterly using the old nine number entry system.

Contact us if you need VAT advice.