Potential VAT changes
Change to VAT registration / deregistration thresholds
There’s talk (especially from business representatives) of adjusting the VAT registration threshold. Either lowering it to bring more small businesses in or increasing it to reduce compliance burden. The aim would be either to raise revenue or ease burdens on smaller firms. No formal proposal has yet been confirmed but it is likely that the VAT registration will be changed.
Potential VAT relief or rate cut for sectors under pressure
Some hospitality, retail, or leisure sector groups are calling for VAT cuts (or reduced rates) to help with inflation, cost pressures, and competition. This could manifest as reduced VAT on certain services (food in pubs, possibly) or targeted relief measures. Whether that will happen depends on fiscal space which as we know is very small. Any relief in this area would be hugely welcomes by clients in the hospitality sector given the very difficult economic environment they are operating in.
Adjustments to VAT on goods or services that have seen rate anomalies or inequities
For example, public charging for electric vehicles is more heavily VAT‑burdened than home charging, which some argue is unfair. There’s discussion that this (and similar anomalies) might be addressed. This would be a move in the right direction for business supplying EV charging and might encourage wider use of electric vehicles.
Tighter compliance and administrative changes
Since the Government is already consulting on digitalisation (e‑invoicing, online marketplaces), it’s likely there will be proposals to strengthen the tax‑administration side: closing loopholes, improved VAT reporting, possibly more frequent or real‑time data requirements. All businesses would potentially be impacted this change and this is likely to include spending significant resources to comply with any new measures. Hot off the back of the recent rise in Employers’ National Insurance Contributions, this will put further pressure on businesses at a time when the government is looking to grow the economy.
VAT “headline rate” increase less likely
Although calls from e.g. CBI have been made to reconsider manifesto pledges, including those about VAT, there’s less credible speculation that the standard rate (20 %) would go up. That would be politically sensitive and could have inflationary consequences. Media discussion suggests altering thresholds or reliefs is more likely than raising the standard rate.
Customs & international trade
Potential review of Low Value Consignment Relief
It is expected that there will be a review of the Low Value Consignment Relief regime, currently set at £135. This is in response to concerns raised by UK retailers, where overseas sellers are perceived to be gaining an unfair advantage that distorts trade and is open to abuse.
Could government look to remove the Postponed Import VAT Accounting (PIVA) mechanism?
PIVA was introduced following Brexit, allowing importers to account for import VAT directly in their VAT returns, rather than paying and later reclaiming. By removing PIVA, the government would realise a huge cash flow advantage.
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