There have been rumours that the Chancellor could lower the £85,000 VAT threshold in tomorrow's Autumn Budget which would come as a blow to small businesses, who currently stall growth and tread water at £84,000 to avoid a VAT charge, explains Sara White, editor of Accountancy
As one of the largest generators of tax, VAT is clearly a rich source of revenue for the Exchequer so it is hardly surprising that the Treasury has been eyeing up ways to increase yield.
It currently accounts for 22% of the entire tax take raising £120bn in 2016-17. The VAT take dwarfs the £49.5bn from corporation tax, up 12% from £43.4bn in 2015/16, underlining the argument that a lower corporation tax rate does raise the overall tax take. But whether ever decreasing rates will continue to have the same impact when the current 19% rate drops to 17% from 1 April 2020 is questionable.
Without doubt, businesses want certainty, even more so than usual with the lack of clarity or progress on Brexit, so surely fixing the corporation rate would offer a certain level of reassurance. Even at 19% the UK has one of the lowest corporation tax rates in the world, and certainly in the G7. Remember in 2008 the main rate was 30% while small companies were taxed at 20%.
