OTS unveils eight ways to change your VAT bill

The Office of Tax Simplification has lived up to expectations by publishing a range of ways to reform VAT -- a tax that it says is “showing its age.”

To tackle a range of “irritating administrative technicalities,” effects of the £85,000 threshold and complex “quirks,” the office makes 23 recommendations about VAT, introduced in 1973.

Within those, and including its lead recommendation of reforming the future level and design of the threshold, are eight core recommendations, submitted in time for Autumn Budget.

The 8 core recommendations are:

• To 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.”
• For HMRC to keep a programme designed to improve the clarity of its guidance and its responsiveness to requests for rulings in areas of uncertainty
• Consider ways that the Revenue can reduce the uncertainty and administrative costs for business relating to potential penalties when inaccuracies are voluntarily disclosed
• Launch a “comprehensive review” led by HMRC and the Treasury into the reduced rate, zero-rate and exemption schedules.
• Look at increasing the partial exemption de minimis limits in line with inflation, and explore alternative ways of removing the need for businesses incurring insignificant amounts of input tax to carry out partial exemption calculations
• Contemplate further ways that HMRC could simplify partial exemption calculations and improve the process of making and agreeing special method applications
• Review whether capital goods scheme categories other than for land and property are needed, and review the land and property threshold
• Relook at the current requirements for record- keeping and the audit trail for options to tax, and the extent to which this might be handled online.