50 Years of VAT!
31st March 2023
On 1st April 2023, VAT celebrates its 50th anniversary since it was first introduced in 1973.
VAT is a tax placed on a product or service at each stage of its production and distribution. VAT is an important source of revenue for the Government.
The History of VAT
VAT was first introduced in France, in 1963. The UK adopted this Value Added Tax 10 years later, on 1st April 1973. VAT replaced the Purchase Tax, which saw goods classed as ‘luxury’ initially hit with a tax of 33.33% during World War II. The tax was introduced to try and discourage waste.
The rate of VAT has changed many times since it was introduced in 1973, starting at 8%, increasing in the 1980’s to 15% and to 17.5% in the 1990’s.
VAT at Present
At present, the standard rate of VAT is 20%. At present, you must register for VAT if your taxable turnover for the last 12 months is over £85,000. This annual turnover limit has increased from just £25,400 in 1990!
Making Tax Digital (MTD) was introduced in April 2019 and was extended to all VAT registered businesses from April 2022.
The essence of MTD for VAT is:
- Businesses and organisations are required to maintain digital accounting records.
- Businesses and organisations are required to use a functional compatible software product to submit updates and returns to HMRC. The software uses HMRC’s API (Application Program Interfaces) platform to submit information to HMRC.
Recently we have seen temporary changes to VAT due to COVID 19. In July 2020, VAT was temporarily reduced to 5% for the hospitality, hotel, and leisure sectors to entice customers who were cautious of using these services in uncertain times.
Now the standard rate of VAT has returned to 20% across these sectors.
VAT in the Future
For VAT periods beginning after 1 January 2023, the long-standing default surcharges applicable to the late submission of returns and/or the late payment of VAT will be replaced by a new penalty regime.
These will work (even for Nil/repayment VAT returns) on a points-based system, dependent on your return submission frequency. For each return submitted late a taxpayer will receive a penalty point. Once the penalty point threshold is reached (which is 4 for quarterly Returns), the taxpayer will receive a £200 penalty and a further £200 penalty for each subsequent late submission while at the threshold.
If you require assistance with anything relating to VAT please contact your nearest office where a member of our staff will be able to help.
Disclaimer - All information in this post was correct at time of writing.
