Overview

The Value Added Tax (VAT) Bill aims to increase the VAT registration threshold for businesses and exempt several goods and services from VAT. This means some smaller businesses will no longer need to register for VAT, and certain items will become cheaper for consumers.

Description

VAT Registration Threshold Increase:

The bill raises the turnover threshold for mandatory VAT registration. This means businesses with a turnover below £100,000 will no longer be required to register for VAT, up from the previous £85,000. Specific thresholds vary slightly depending on the type of business.

Exemption of Goods and Services from VAT:

The bill exempts several goods and services from VAT, including: domestic fuel and power (with some limitations), fitness equipment and services, goods subject to existing excise duties (like alcohol and tobacco), repairs and improvements to historic buildings, insulating materials for home improvements, and women’s sanitary products.

Further details on Exemptions:

The bill provides detailed definitions and specific criteria for these exemptions, addressing matters such as what constitutes domestic use of fuel, qualifying uses of certain products, and the types of sanitary products included. The Treasury will have the power to further define some terms through regulations.

Consequential Amendments:

The Treasury will update relevant schedules within the Value Added Tax Act 1994 to reflect the changes introduced by this bill. Furthermore, a section of the Finance Act 2016 relating to the taxation of women's sanitary products is repealed to reflect the new exemption.

Government Spending

The bill is expected to reduce government revenue from VAT. The exact figure is not specified in the bill itself, but it will depend on the number of businesses affected by the increased threshold and the consumption of newly exempt goods and services.

Groups Affected

The bill will affect the following groups:

• Small Businesses: Businesses with turnovers previously below £104,000 but above £100,000 will benefit from not having to register for VAT. This could lead to administrative cost savings and increased profits.
• Consumers: Consumers purchasing newly exempt goods and services will see a price reduction due to the removal of VAT.
• UK Treasury: The Treasury will experience a decrease in VAT revenue.
• Historic Building Owners/Renovators: The exemption for repair and improvement work will reduce costs for those undertaking renovations on historic buildings.

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