The government has launched a “call for evidence” on the design of the VAT registration threshold, amid concerns that the current system dis-incentivises small business growth.
In November 2017, the £85,000 threshold at which businesses are required to register for VAT was frozen until 2020.
This decision followed a report by the Office for Tax Simplification, which said that the current VAT system could have “distortionary” effects on small businesses.
It observed a high number of businesses with a turnover just below the threshold, which could suggest they are deliberately limiting their growth to avoid a high VAT bill.
The government has opened a consultation on possible policy solutions, including proposals for a “smoothing mechanism” to introduce the tax more gradually.
Alan McLintock, chair of the indirect taxes sub-committee at the Chartered Institute of Taxation, said:
We support strongly making the rules on VAT less complex and easier to apply, in the expectation that it should lead to less uncertainty among business, and fewer disputes with HMRC.
I am pleased to see a range of options being put forward by the Treasury, and to see the Government thinking imaginatively about how to achieve a wider reach with their call for evidence.
You might be interested in...
10 Jul 2026
After his grandad died, TC Group Holbeach’s Digital Development Manager and keen cricketer, Jake Burton, thought a good way to honour him would be to fundraise for Alzheimer’s Research UK. Five years on, he’s raised £67,000 and counting.
Learn more
How TC Group’s Jake Burton raised thousands to help fight dementia
07 Jul 2026
Could your business run without you? Explore why owner dependency is a major risk and how early succession planning can protect continuity and value.
Learn more
Succession Starts Long Before You’re Ready To Leave
07 Jul 2026
Making constant decisions is taking its toll on business owners. Explore why decision fatigue happens and how to build clarity into everyday decision-making.
Learn more
Decision Fatigue Is Not Weakness – It’s A Leadership Risk
07 Jul 2026
In a fast-moving, uncertain world, business owners need clarity, not certainty. Discover how real-time insight supports better decisions.
Learn more
Clarity Over Certainty: How Business Owners Can Regain A Sense Of Control
07 Jul 2026
In a world where certainty is no longer the norm, the businesses that succeed are those that keep moving. Drawing on insights from 1,500 UK business leaders, Stephen Watts explores how leadership is evolving.
Learn more
Why standing still in business is no longer an option
01 Jul 2026
TC Group has given a clear signal of its commitment to the success of the region by moving its team to the heart of Bournemouth Christchurch and Poole (BCP).
Learn more
TC Group moves to the heart of Bournemouth