VAT receipts in the UK declined by 1.5% in 2019-2020, compared to the previous financial year. The HMRC VAT bulletin compiles data on the latest VAT trends. The report notes that the decrease was anomalous. UK VAT receipts have increased consistently from 2010 to 2019.
The decline in VAT in 2020 is attributed in part to the UK’s VAT deferral measures. Temporary VAT deferral measures were introduced by many countries to help businesses manage cash flow squeeze related to Covid-19.
Big traders pay the most UK VAT
According to the report, traders with an annual turnover exceeding £10 million declared the majority of domestic VAT (62%).
Interestingly, traders with an annual turnover above £10 million declared £67 billion in net Home VAT. However, those businesses only account for 1.5% of all traders.
7.9% of traders declared income of £1 million to £10 million. Such firms accounted for 22% of Home VAT.
Sector by sector contributions
The Wholesale and Retail Sector contributed the most Home VAT, contributing 26.7% of the total.
The Professional, Scientific, and Technical Services sector comes next, followed by the Manufacturing Sector.
Global VAT trends
The general upward trend on UK VAT is in line with global trends.
The OECD notes that VAT has become the largest source of consumption tax, “accounting for 6.8% of GDP and 20.4% of total tax revenue in OECD countries in 2018 on average”.
The OECD report also notes that countries are actively seeking to modernise their VAT protocols and update VAT regulations to meet the demands of the modern economy. For example, more countries are expected to impose digital services VAT.
Be VAT smart or lose out
Clearly, VAT compliance is front and centre to doing business in the global economy. In many ways, it’s the most dominant and complex of taxes.
However, too many businesses do not have effective processes in place to ensure their VAT compliance is efficient and effective.
Such companies spend too much time and effort on complex, error-prone manual VAT compliance processes. Furthermore, they put themselves at risk of serious penalties and potentially massive interest charges.
Vatglobal’s technology-driven VAT compliance solution makes VAT compliance simple. Get in touch to optimise your VAT compliance and ensure you are never subject to potentially ruinous penalties for noncompliance.