VAT receipts up 4.8% to £34.5bn in Q1

HMRC has reported total VAT receipts for the first quarter of the year were £34.5bn, 4.8% higher than the same quarter last year, continuing a long-term upward trend

Net home VAT receipts for this quarter were £26.1bn which is £348m (1.3%) higher than the same quarter last year. Import VAT receipts this quarter were £8.3bn, 17.3% higher than the same quarter last year.

Home VAT payments and repayments for this quarter were both higher than in the same quarter of the previous two years.  Home VAT payments increased by £2.2bn from the same quarter of the previous financial year.

There were 70,000 new registrations and 45,000 de-registrations in quarter two of 2018/19. The size of the live trader population has increased steadily since the end of 2012, except for a small decline in 2017. This appears to be continuing its increase in quarter 2 of 2018/19, and is now around 2.2m.

The increase in VAT take is in line with HMRC’s effort to close the tax gap and reduce VAT fraud. The introduction of Making Tax Digital for VAT is also expected to improve VAT revenues as the level of error is reduced.

However, there was less optimism on public borrowing figures, which hit £1.7bn in March 2019, up from £0.8bn in March 2018. As a result, the total budget deficit for 2018/19 is estimated at £24.7bn, higher than the OBR's £22.8bn forecast in March.

There was an improvement in the budget deficit, which helped to counteract the rise in public borrowing.

PwC chief economist John Hawksworth said: ‘The budget deficit is down by more than £17bn on a year earlier and now stands at its lowest level in 17 years. Gordon Brown's 'golden rule' of borrowing only to invest was met with a margin of £19bn in 2018/19, showing that the underlying state of the public finances is now relatively healthy.

‘This reflects buoyant tax revenue growth of around 5% over the past year, as opposed to central government spending growth of only around 3%.

While overall GDP growth has slowed over the past year as business investment has been hit by Brexit-related uncertainty, continued strong jobs growth and an upturn in average earnings growth has pushed up income tax revenues, while also supporting consumer spending and VAT receipts.

‘Economic growth has therefore been relatively 'tax-rich' over the past year, which has played a key role in bringing the budget deficit down to more sustainable levels.

‘While there are many political and economic uncertainties ahead, the fact that the public finances are in their best shape for 17 years should give the Chancellor some room for manoeuvre in his Autumn Budget and Spending Review.’

HMRC Quarterly VAT Statistics, March 2019

Pat Sweet, Sara White

 

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