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General Election: VAT Perspectives – Conservative Party

by Berthold Bauer on July 2, 2024

On 22nd May 2024, Prime Minister Rishi Sunak announced a general election to be held 4th July 2024, prompting speculation about tax measures each party might adopt.

This article seeks to pull out the VAT policies as contained in key party manifestos, and touches on the on rationale, impacts and uncertainties these bring. For avoidance of doubt, this article does not seek to comment on resources beyond the manifestos, e.g. interviews, debates, statements from candidates in isolation, etc.

Conservative Party

Keep the VAT threshold under review and explore options to smooth the cliff edge at £90,000

  • This is included within a broader 10-point plan seeking to deliver for SMEs.
  • Whilst the specifics of how the cliff edge could be made smooth are not elaborated on, common difficulties we see SMEs facing that are at the VAT registration threshold include, increased administrative burdens, a negative cash flow impacts and feeling competitively disadvantaged on pricing.
  • Hence potential ways one could smooth the cliff edge could include:
    • applying a reduced rate for earnings between £90,000 and a given figure, before needing to apply the full 20% VAT rate,
    • widening the thresholds currently used for simplification measure such as the Flat Rate, Cash Accounting and Annual Accounting Scheme,
    • introducing phased compliance requirements such as guaranteed lead in times to get ready for Making Tax Digital (MTD) for newly registered business, easements on submission deadlines in the first year of registration, and more.
  • Although demonstrating a commitment to SMEs, the lack of clarity given when saying this will be kept under review, does not provide much certainty on what options will be explored, with the above suggestions being speculative only.

…we will also not raise the rate of income tax or VAT

  • Much of the comments on tax in the manifesto are focused on cutting taxes, tax guarantees or maintaining existing tax measures, including in the case of VAT.
  • However, the Conservatives also claim that ‘at least a further £6 billion a year’ will be generated through ‘tacking tax avoidance and evasion’. The manner in which they will go about this however is unclear from the manifesto alone.

VAT could be impacted by this however the specific powers or ways this could be implemented are not touched upon whatsoever.

 

See other party VAT perspectives:
Labour Party
Liberal Democrats
Green Party
Reform UK

 

We have been in conversation with many organisations on the potential impacts these policies may have on them and their viability. If this is something you would like to discuss further, then please contact us via our free VAT helpline and a consultant will reach out to you to discuss.

Berthold BauerGeneral Election: VAT Perspectives – Conservative Party

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