VAT receipts threatened by Brexit
14 Jan 2019
VAT receipts represent an increasing percentage of HMRC’s total tax take, suggesting the tax burden is increasingly being shifted to consumers, and increasing the risks to the tax base post-Brexit, according to research by UHY Hacker Young
14 Jan 2019
The firm’s analysis show VAT receipts as a percentage of HMRC’s total tax have risen to 21% over the last ten years, up from 18% in 2008/09. The total amount of VAT collected by HMRC has jumped 60% over the same period to £125bn in 2017/18, up from £78bn.
UHY Hacker Young says its analysis suggests the Treasury has become increasingly reliant on VAT over the last decade. HMRC’s total tax take increased to £594bn last year and is now at a 30-year high. In comparison, income tax receipts were £180bn last year, representing 31% of the total, and corporation tax receipts £54bn (9%).
Sean Glancy, VAT Partner at UHY Hacker Young, said: ‘VAT has become a crucial component of total tax take and the government will be keen to protect this revenue source.
‘The long term increase in VAT receipts will be most keenly felt by lower income consumers who will be further squeezed by higher import costs feeding through into prices post-Brexit.’
However, Glancy pointed out that depending on the outcome, Brexit could result in falling VAT receipts as consumers spend less due to higher prices and increased economic uncertainty.
‘The government could put contingency plans in place to help counter the potential fall in receipts. For example, VAT rates could be reduced in order to encourage consumer spending post-Brexit,’ he said.
Report by Pat Sweet