Relief for small businesses – the VAT registration threshold is frozen for two years
Clearly, the government has been taking in the Office of Tax Simplification’s report and the issues it raises regarding the current VAT registration threshold of £85,000. The threshold causes a bunching of businesses just below the threshold. This artificially stifles the potential growth of businesses and the economy. Although the Chancellor announced this issue will be subject to consultation, his freezing of the threshold for two years indicates an acceptance that continuing the practice of inflationary rises is inadequate and that there is no quick solution here. Any substantial change up or down will have a significant impact on small - especially labour intensive - businesses and their private or exempt business customers, such as care homes, charities and housing associations that use small, unregistered, suppliers at present. The action the Chancellor has taken is as expected but a sigh of relief, for now, for those who were worrying about a significant reduction in the threshold.