Buying your business jet through the Isle of Man has been much in the news this week but a new report from the Office of Tax Simplification (OTS) makes a number of less contentious suggestions for simplifying VAT for everyone.
Among its 23 recommendations are that the Government should examine the current approach to the level and design of the VAT registration threshold, with a view to setting out a future direction of travel for the threshold, including consideration of the potential benefits of a smoothing mechanism.
The OTS also wants HM Revenue and Customs (HMRC) to improve both the clarity of its guidance on VAT issues and its responsiveness when asked to rule in areas of uncertainty.
HMRC should consider ways of reducing the uncertainty and administrative costs for business relating to potential penalties when inaccuracies are voluntarily disclosed, the report argues, and both the Treasury and HMRC should undertake a comprehensive review of the reduced rate, zero-rate and exemption schedules.
Existing requirements for record keeping and auditing should be reviewed, the OTS recommends, with a view to assessing the extent to which they could be met online.
Angela Knight of the OTS said that the report presents an opportunity to start addressing the many anomalies of VAT.
“The tax is awash with layers of complexity reflecting both its evolution over the last 45 years and aspects of the Purchase Tax that VAT replaced,” she explained.
Federation of Small Businesses (FSB) Chairman Mike Cherry pointed out that complying with VAT obligations is massively time-consuming for small firms, with over a quarter identifying it as the most complex tax to deal with.
“Our small business owners should be spending their time and money growing their firms, not navigating an array of different VAT schemes and an inconsistent list of exemptions as long as your arm,” he argued.
"Value added tax: routes to simplification" is available at http://bit.ly/2zr6JfR.