Official Statistics

Quality report: Value Added Tax (VAT) annual statistics

Published 15 February 2023

1. Contact

• Organisation unit - Knowledge, Analysis and Intelligence (HMRC KAI)

• Name - Indirect Tax Receipts Monitoring, Indirect Taxes, Customs & Co-ordination

• Mail address - Three New Bailey, Salford, M3 5FS

• Email - revenuemonitoring@hmrc.gov.uk

2. Data description

The VAT annual bulletin contains statistics on monthly VAT receipts, Home VAT and Import VAT.

It also includes Home VAT liabilities declared on traders’ returns classified by sector and trade group, as well as data on VAT registrations, de-registrations and trader population.

Receipts data and trader population figures are included up to the latest full financial year before the bulletin release.

This publication only provides figures for past years. Forecasts of future VAT receipts are produced and published by the Office for Budget Responsibility (OBR) and can be found on their website.

2.1 Classification system

For each VAT registered entity there is relevant VAT information covering the unique VAT registration number, the relevant trade sector for that entity, any VAT schemes the entity uses, and their trader status.

The trade groups that have been used are those described in the 2007 Standard Industrial Classification of economic activities (SIC2007), details of which can be found on the Office for National Statistics website UKSIC2007.

2.2 Tax coverage

Value Added Tax (VAT) is a tax added to most products and services sold by VAT-registered businesses.

Businesses have to register for VAT if their VAT taxable turnover is more than the registration threshold (£85,000 in 2021 to 2022). They can also choose to apply for voluntary registration if their turnover is less than the threshold.

2.3 Variable definitions

VAT Receipts

The amount of net VAT cash receipts collected by HMRC which covers both Home VAT and Import VAT.

VAT Liabilities

The amount of Home VAT liabilities declared on returns which covers the output tax charged on sales and the input tax paid on supplies.

Financial year

A financial year stretches from 1 April until 31 March the following calendar year.

Statistical unit

The unit in the statistics is businesses and other entities required to pay VAT within the UK.

Time coverage

The statistics cover the time period from financial year 1973 to 1974 until the latest financial year for which a complete set of VAT returns are available.

3. Statistical processing

3.1 Source data

The data used to compile the VAT annual bulletin comes from several sources:

Total VAT comprises Home VAT and Import VAT; Home VAT is taken from a combination of the Enterprise Tax Management Platform (ETMP) and HMRC’s daily banking figures.

Import VAT is taken from the Customs and Excise Core Accounting System (CECAS).

VAT registrations and de-registrations administrative data comes from the VAT mainframe and ETMP, which contain live information on the VAT population.

Home VAT liabilities data is based on a dataset capturing a summary of all VAT returns and trader level information for the financial year. The data is compiled into a single table holding one record for all traders.

3.2 Frequency of data collection

The VAT annual bulletin tables and commentary are usually produced once every year.

3.3 Data collection

The VAT summary returns dataset used to provide statistics on Home VAT liabilities and the data on VAT receipts (Home and Import VAT) and registered trader population are produced by HMRC analysts using administrative data captured on systems such as the Enterprise Tax Management Platform (ETMP), Customs and Excise Core Accounting System (CECAS) and VAT mainframe.

3.4 Data validation

Checks carried out on the data include:

Automated checks take place when loading data into the analysis database. Inconsistencies are automatically checked and corrected.

Analysts check that the number of records loaded into the summary dataset is as expected based on previous years.

Reports are run showing the cases with the largest net tax and turnover. These are examined individually. Records deemed to be incorrect are adjusted in the summary dataset.

Any large changes in receipts or liabilities figures from one statistical release to the next are investigated by double running the program and checking the table links.

Total VAT receipts figures are checked for consistency with the latest HMRC financial outturn position.

3.5 Adjustment

For receipts there are accounting adjustments to remove penalties and occasional payment errors. The VAT returns summary dataset is cleansed to ensure that outlier values in returns are inspected and adjusted as appropriate.

4. Quality Management

4.1 Quality assurance

All statistics produced by HMRC analysts must meet the standards in the Code of Practice for Statistics produced by the UK Statistics Authority and all analysts adhere to best practice as set out in the ‘Quality’ pillar.

Analytical Quality Assurance describes the arrangements and procedures put in place to ensure analytical outputs are error free and fit-for-purpose.

Every piece of analysis is unique, and as a result there is no single quality assurance (QA) checklist that contains all the QA tasks needed for every project. Nonetheless, analysts in HMRC use a checklist that summarises the key QA tasks and is used as a starting point for teams when they are considering what QA actions to undertake.

Teams amend and adapt it as they see fit, to take account of the level of risk associated with their analysis, and the different QA tasks that are relevant to the work.

At the start of a project, during the planning stage, analysts and managers make a risk-based decision on what level of QA is required.

Analysts and managers construct a plan for all the QA tasks that will need to be completed, along with documentation on how each of those tasks are to be carried out and turn this list into a QA checklist specific to the project.

Analysts carry out the QA tasks, update the checklist, and pass onto the Senior Responsible Officer for review and eventual sign off.

4.2 Quality assessment

The QA for this project adhered to the framework described in ‘4.1 Quality assurance’ and the specific procedures undertaken were as follows:

Stage 1 – Specifying the question

Up to date documentation was agreed with stakeholders setting out outputs needed and by when; how the outputs will be used; and all the parameters required for the analysis.

Stage 2 – Developing the methodology

Methodology was agreed and developed in collaboration with stakeholders and others with relevant expertise, ensuring it was fit for purpose and would deliver the required outputs.

Stage 3 – Building and populating a model/piece of code

The bulletin was quality assessed as follows:

• analysis was produced using the most appropriate software and in line with good practice guidance

• data inputs were checked to ensure they were fit-for-purpose by reviewing available documentation and, where possible, through direct contact with data suppliers

• QA of the input data was carried out

• the analysis was audited by someone other than the lead analyst – checking code and methodology

Stage 4 – Running and testing the model/code

The bulletin was quality assessed as follows:

• results were compared with those produced in previous years and differences understood and determined to be genuine

• results were determined to be explainable and in line with expectations

Stage 5 – Drafting the final output

The final outputs were quality assessed as follows:

• checks were completed to ensure internal consistency (e.g. totals equal the sum of the components)

• the final outputs were independently proofread and checked

5. Relevance

5.1 User needs

This analysis is likely to be of interest to users under the following broad headings:

• national government – policy makers and MPs

• regional and local governments

• academia and research bodies

• media

• industry stakeholders

• general public

5.2 User satisfaction

The demand for the VAT annual bulletin is measured by the number of unique page views which represents the number of visits during which the page was viewed at least once. Within the financial year ending in 2022, there were 1,530 unique page views.

We have consulted on these statistics a number of times over several years, the most recent of which were:

• the Consultation on reduction and consolidation of HMRC statistics publications, which ran from 8 February 2021 to 12 March 2021, following which, instead of being published quarterly, the statistics from the VAT Bulletin was included within the Value Added Tax (VAT) annual statistics publication, while monthly VAT receipts statistics continued to be published in the publication HMRC tax receipts and National Insurance contributions for the UK

• the Consultation on changes to HMRC statistics publications, which ran from 24 October 2022 to 16 January 2023, where feedback was being analysed at the time of publication but no proposed changes to the VAT annual statistics were included

5.3 Completeness

Report information on the extent to which the necessary statistics are available. Report where requirements based on relevant legislation, regulation and guidelines are not met and provide reasons for this.

It is a legal requirement that all businesses are regulated and submit the relevant returns required. Penalties exist for non-compliance. The statistics contained in this report can therefore be considered as complete.

HMRC report estimates of the tax gap across all taxes and duties annually.

6. Accuracy and reliability

6.1 Overall accuracy

This bulletin is based on administrative data, and accuracy is addressed by eliminating non-sampling errors as much as possible through adherence to the quality assurance framework. The nature of the administrative data used may mean some errors exist in the recorded figures which would impact the accuracy of production estimates.

The potential sources of error include:

• Taxpayers entering incorrect information onto return forms

• human or software error when entering the data into systems

• Taxpayers not completing their returns by the required date

• mistakes in the programming code used to analyse the data and produce the statistics

6.2 Sampling error

No sampling takes place within the Value Added Tax (VAT) annual statistics.

6.3 Non-sampling error

Coverage error

The data used to produce these publications is exhaustive and covers all VAT due under UK jurisdiction. This means that data on liabilities and receipts refers to all VAT that is declared and paid. Coverage error is therefore not relevant.

Measurement error

The main sources of measurement error could be categorised as respondent errors and include the following:

• taxpayers may make errors entering their information onto return forms, whether this is done on paper or electronically

• VAT return data is subsequently entered onto HMRC systems either manually or by electronic transmission, which is another point at which data may be altered due to human or software error

Nonresponse error

The Value Added Tax (VAT) annual statistics is routine administrative data based on receipts and clearances that must be submitted, therefore nonresponse error is not relevant.

Processing error

It is possible that errors exist in the programming code used to analyse the data and produce the statistics. This risk is reduced through developing a good understanding of the code and thoroughly reviewing and testing the programs that are used.

6.4 Data revision

Where there are revisions, they are clearly marked as ‘revised’, and information is given as to the reasons and scale of the revisions if appropriate.

Every release of a new publication, previous data is reviewed and any revisions required are made. If revised data was not previously marked as provisional it is clearly highlighted in the statistics with a ‘[revised]’ markup within the statistical tables.

Planned revisions occur with the release of the annual receipts publication. This alignment occurs every March and involves the previous financial year. Receipts are considered provisional until the publication is released.

The United Kingdom Statistics Authority (UKSA) Code of Practice for Statistics requires all producers of Statistics to publish transparent guidance on the policy for revisions.

6.5 Seasonal adjustment

No seasonal adjustment occurs within the Value Added Tax (VAT) annual statistics and is therefore not relevant to the publication.

7. Timeliness and punctuality

7.1 Timeliness

The VAT annual bulletin is usually published in the Winter and covers the financial year that ended in the previous year.

In line with the Code of Practice for Statistics, these statistics are pre-announced on GOV.UK.

HMRC also publishes an annual publication plan on GOV.UK.

7.2 Punctuality

In accordance with the Code of Practice for Statistics, the exact date of publication will be given not less than one calendar month before publication on both the Schedule of updates for HMRC’s statistics and the Research and statistics calendar of GOV.UK.

Any delays to the publication date will be announced on the HMRC National Statistics website.

The full publication calendar can be found on both the Schedule of updates for HMRC’s statistics and the Research and statistics calendar of GOV.UK.

There have been no incidents of late publication of the Value Added Tax (VAT) annual statistics since the previous background quality report.

8. Coherence and comparability

8.1 Comparability over time

Comparability over time of duty rates and receipts at constant prices is reliant upon the deflator used. HMRC uses the Inflation and price indices series published by the Office for National Statistics (ONS), and values are therefore subject to any biases this series might present.

8.2 Coherence – cross domain

No known issues regarding coherence between domains.

Coherence – sub-annual and annual statistics

No known issues regarding coherence between sub-annual and annual statistics.

Coherence – national accounts

The statistics are coherent with the national accounts framework, but users should note that VAT revenue is reported on a cash basis by HM Revenue and Customs (HMRC), for example when cash payments are received, but within some national accounts publications, such as the Office for National Statistics Public Sector Finances publication, VAT revenue is published on an accrued basis, for example when tax liability was accrued by taxpayers.

8.3 Coherence – internal

No known issues regarding coherence between internal datasets.

9. Accessibility and clarity

9.1 News release

The following press releases relating to VAT have been made since the last publication:

• Making Tax Digital for VAT is coming – are you ready?

• Less than one month left for VAT businesses to be ready for Making Tax Digital filing

9.2 Publication

The data is publicly available within the Value Added Tax (VAT) annual statistics and is published at 9:30 am on the pre-announced date of release.

The VAT annual bulletin commentary is published in Hypertext Markup Language (HTML) format, as generated within internal UK government HTML Markdown software. The Value Added Tax (VAT) annual statistics data tables which accompany the commentary are published in Open Document Spreadsheet (ODS) format.

Accompanying the bulletin is a background and references document which includes:

• definitions for VAT and products

• details on how VAT is levied and paid

• methodology for producing VAT statistics

• statistical quality information, including HMRC’s rounding policy

• hyperlinks to relevant pages where bulletin users can find more information

There is also an accompanying historic VAT rates document.

Both historic duty rates and background and references are published in HTML format.

HMRC produced a quarterly VAT Bulletin from October 2016. Following the consultation on the reduction and consolidation of HMRC statistics publications, which ran between 8 February 2021 and 12 March 2021, the final publication of this bulletin was in July 2021. From Autumn 2021 the contents of this bulletin have been provided within the Value Added Tax (VAT) annual statistics.

This reformatting of the Value Added Tax (VAT) annual statistics formed part of HMRC’s wider accessible documents policy.

Changes made to the VAT annual bulletin included:

• replacement of Portable Document Format (PDF) files previously used for statistics commentary with HTML documents for the same purpose

• migration of all VAT background, references and rates information from Microsoft Excel tables to HTML documents

• migration of data tables from Microsoft Excel to ODS format

• simplification of language used to avoid jargon and clear explanations used to describe all non-decorative features

An accessibility report was first produced to identify required format changes. The overriding aim of this reformat was to improve how perceivable, operable, understandable and robust the VAT annual bulletin is for all users, in line with the Web Content Accessibility Guidelines (WCAG 2.1) design principles for accessibility.

9.3 Online databases

This analysis is not used in any online databases.

9.4 Micro-data access

Access to this data is not possible in micro-data form, due to HMRC’s responsibilities around maintaining confidentiality of taxpayer information.

9.5 Other

There aren’t any other dissemination formats available for this analysis.

9.6 Documentation on methodology

Background and references to the Value Added Tax (VAT) annual statistics is publicly available to users within the Value Added Tax (VAT) annual statistics.

9.7 Quality documentation

All statistics produced by HMRC, must meet the standards in the Code of Practice for Statistics produced by the UK Statistics Authority and all analysts adhere to best practice as set out in the ‘Quality’ pillar.

Information about quality procedures for this analysis can be found in section 4 of this document.

10. Cost and burden

The update to the VAT annual bulletin takes up to 20 working days in total for the main analyst to complete and receive QA from other analysts, the team leader, and the person signing off the release. The annual cost, therefore, is around 20 days a year.

There is no respondent burden since the data is taken from administrative sources which are used by taxpayers to make their usual returns to HMRC.

11. Confidentiality

11.1 Confidentiality – policy

HMRC has a legal duty to maintain the confidentiality of taxpayer information.

Section 18(1) of the Commissioners for Revenue and Customs Act 2005 (CRCA) sets out our duty of confidentiality.

This analysis complies with this requirement.

11.2 Confidentiality – data treatment

There are no special rules for confidentiality or data treatment in these statistics.

Before going live, the statistics is classified as pre-released Official Statistics, and is therefore subject to a restricted protective marking when referred to in email correspondence and is subject to the Code of Practice for Statistics, which is strictly enforced.