Overview

The Value Added Tax (VAT) Bill aims to increase the VAT registration threshold for businesses and exempt certain goods and services from VAT. This will simplify VAT compliance for smaller businesses and potentially reduce the cost of specific goods and services for consumers.

Description

This bill makes two key changes to the UK's Value Added Tax system:

Increased VAT Registration Threshold

The bill raises the turnover threshold above which businesses must register for VAT. The current threshold will be increased from £85,000 to £104,000 for most businesses and from £83,000 to £100,000 for others. This means more small businesses will be exempt from VAT registration.

Exemption of Certain Goods and Services

The bill exempts several goods and services from VAT, including: domestic fuel and power (with specific conditions); fitness equipment and services; goods already subject to excise duties (alcohol, tobacco, fuel); repairs and improvements to historic buildings; insulating materials for home improvements; and women's sanitary products.

The bill also grants the Treasury the power to define certain terms through regulations (e.g., "fitness equipment," "historic buildings") and to make consequential amendments to other related legislation. The legislation will repeal Section 126 of the Finance Act 2016 which relates to VAT on women’s sanitary products.

Government Spending

The bill is expected to reduce government revenue from VAT due to the increased registration threshold and exemptions. Precise figures on the potential cost to the government are not provided within the bill text.

Groups Affected

• Small Businesses: Many small businesses will benefit from a higher VAT registration threshold, simplifying their administrative burden and potentially increasing their profits.
• Consumers: Consumers will see reduced prices on several goods and services due to the VAT exemptions. This includes domestic fuel and power (subject to specific conditions), fitness services, sanitary products, and those related to historic building repair and insulation.
• Treasury: The Treasury will experience a reduction in VAT revenue as a result of the changes proposed in the bill.
• Businesses selling exempted goods/services: These businesses will benefit from being able to sell their goods/services without charging VAT, potentially increasing their competitiveness.

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