Post-Brexit VAT cut floated amid record high in receipts
Value Added Tax could be cut post-Brexit as a way for the government to protect a new record high in VAT receipts, accountants calculate.
Uncovering a 79% leap in HMRC’s VAT haul over the last eight years, chartered firm UHY Hacker Young said receipts have surged from £70billion in 2009/10 to £125bn in 2017/18.
But the firm says the Treasury might now cut the tax, levied on goods and services, as officials fear Brexit could hit consumer spending due to price rises and increased economic uncertainty.
The thinking is that to protect VAT now accounting for over a fifth of HMRC’s total tax take, the government will cut the 20% rate to boost consumer-spending after Britain leaves the EU.
“Contingency plans [might be put] in place to help counter the potential fall in [VAT] receipts,” said UHY’s Sean Glancy, who called the Treasury “increasingly reliant” on them.
He added: “VAT has become a crucial component of total tax take and the government will be keen to protect this revenue source.”
HMRC’s total tax take increased last year to £594bn, which is a 30-year high and represents 33% of GDP. It positions the UK 20th out of 36 OECD countries for highest tax burden, with France top at 46% and Ireland considerably lower at 23%.
VAT was hiked in 2011 from a rate of 17.5% to 20%, before which (in 2008/9) it represented 18% of HMRC’s total tax take. In comparison to its £125bn haul (representing 21% of the take), income tax netted £180bn last year, and corporation tax netted £54bn.
20th January 2019