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Who is likely to be affected
Small businesses currently outside the VAT regime, who make taxable supplies or EU acquisitions between £83,000 and £85,000.
Small businesses registered for VAT, who make taxable supplies below £83,000 or EU acquisitions below £85,000.
General description of the measure
The measure will:
- increase the registration and deregistration thresholds for VAT, in line with inflation
- increase the registration and deregistration threshold for EU acquisitions, in line with the VAT registration threshold
The measure was announced at Spring Budget 2017.
The UK’s VAT registration threshold (above which persons making taxable supplies are required to register and account for VAT) is currently set at £83,000 and is the highest in the EU. Those trading below the threshold can choose to register voluntarily. The deregistration threshold for taxable supplies is currently £81,000. It is set lower than the registration threshold to avoid businesses trading around the threshold level having to frequently register and deregister.
Revalorisation of the threshold will prevent around 4,000 small businesses from having to register for VAT by the end of the 2017 to 2018 financial year.
Background to the measure
Typically, the VAT registration and deregistration thresholds have been revalorised annually in line with inflation using the Retail Price Index (RPI).
The changes to the thresholds will have effect from 1 April 2017.
Current law is included in Schedules 1 and 3 of the Value Added Tax Act 1994.
References to the appropriate thresholds in Schedules 1 and 3 of the Value Added Tax Act 1994 will be updated by secondary legislation, as follows:
In Schedule 1 (registration in respect of taxable supplies: UK establishment):
- in paragraph 1(1)(a), (1)(b), (2)(a) and (2)(b), ‘£83,000’ will be replaced by ‘£85,000’
- in paragraph 1(3), “£81,000” will be replaced by ‘£83,000’
- in paragraph 4(1) and (2), “£81,000” will be replaced by ‘£83,000’
In Schedule 3 (registration in respect of acquisitions from other member states):
- in paragraph 1(1) and (2), ‘£83,000’ will be replaced by ‘£85,000’
- in paragraph 2(1)(a), (1)(b) and (2), ‘£83,000’ will be replaced by ‘£85,000’
Summary of impacts
Exchequer impact (£m)
|2017 to 2018||2018 to 2019||2019 to 2020||2020 to 2021||2021 to 2022|
This measure is not expected to have an Exchequer impact.
This measure is not expected to have any significant economic impacts.
Impact on individuals, households and families
This measure will not impact on family formation, stability or breakdown. This measure relates solely to increasing the VAT registration thresholds for businesses by inflation and will not affect the current availability or price of goods and services from registered and unregistered businesses.
The measure is not expected to have a disproportionate impact on people with any of the characteristics which are protected under the Equality Act 2010 (and relevant Northern Ireland legislation).
Impact on business including civil society organisations
This measure is expected to have a negligible impact on a small number of businesses. Revalorisation of the threshold will save about 4,000 businesses from the costs they would otherwise have incurred in registering for and administering VAT. There are not expected to be any additional on-going costs.
This measure is not expected to have any impact on civil society organisations.
Operational impact (£m) (HM Revenue and Customs (HMRC) or other)
The impact on HMRC costs of revalorisation of the threshold is negligible and will be met from existing baselines.
Other impacts have been considered and none have been identified.
Monitoring and evaluation
This measure will be monitored through information collected from tax returns and receipts.
If you have any questions about this change, please contact Kevin Coyle by Telephone: 03000 598805 or email: Kevin.Coyle@hmrc.gsi.gov.uk.